International Comparison

The following International Accounting Standards are included in this comparison:

IAS 1 Presentation of Financial Statements IAS 2 Inventories IAS 7 Flow Statements IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies IAS 10 Events after the Date IAS 11 Construction Contracts IAS 12 Income Taxes IAS 14 Segment Reporting IAS 16 Property, Plant and Equipment IAS 17 Accounting for Leases IAS 18 IAS 19 Employee Benefits IAS 20 Accounting for Government Grants and Disclosure of Government Assistance IAS 21 The Effects of Changes in Foreign Exchange Rates IAS 22 Business Combinations IAS 23 Borrowing Costs IAS 24 Related Party Disclosures IAS 25 Accounting for Investments IAS 27 Consolidated Financial Statements and Accounting for Investments in Subsidiaries IAS 28 Accounting for Investments in Associates IAS 29 Financial Reporting in Hyperinflationary Economies IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions IAS 31 Financial Reporting of Interests in Joint Ventures IAS 32 Financial Instruments: Disclosure and Presentation IAS 33 Earnings per Share IAS 34 Interim Financial Reporting IAS 35 Discontinuing Operations IAS 36 Impairment of IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 38 Intangible Assets IAS 39 Financial Instruments – Recognition and Measurement Comparison of International Accounting Standards and Lithuanian Accounting Policies

International Accounting Comparison

Comparison of International Accounting Standards with generally accepted accounting practice in Albania, Bulgaria, Byelorussia, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Republic of Macedonia, Romania, Slovakia and Slovenia. The comparison was performed based upon the accounting legislation effective in the above 14 countries as of December 31, 2000. In certain countries, changes to the accounting legislation have occurred as of January 1, 2001. This comparison does not include differences between IAS and generally accepted accounting practice in these countries, subsequent to December 31, 2000. Abbreviations AL Accounting Law B/S Balance Sheet CF Cash Flow ČNB Czech National Bank CZK Czech Koruna (currency) EAL Estonian Accounting Law EASB Estonian Accounting Standards Board EU European Union FIFO First-in-First-Out (inventory valuation) F/S Financial Statements GAAP Generally Accepted Accounting Practice HAS Hungarian Accounting Standard HNB Hungarian National Bank HUF Hungarian Forint (currency) IAS International Accounting Standard LIFO Last-in-First-out (inventory valuation) LVL Latvian Lats (currency) NAS National Accounting Standard P&L Profit and Loss RAS Romanian Accounting Standard RAL Romanian Accounting Law R&D Research and Development SAL Slovak Accounting Law SAS Slovenian Accounting Standard SIC Standing Committee on Interpretations SKK Slovak Koruna (currency) VAT Value-Added-Tax JV Joint Venture EPS Earnings per Share

2 Comparison of International Accounting Standards and Lithuanian Accounting Policies

1. Presentation of Financial Statements Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

Componen Complete set of financial Complete set of Complete set of Complete set of IAS 1 applies to Comparable to Comparable to Complete set of Financial Complete set of Complete set of Only balance Comparable to Complete set of (SAS 24, 25, 26) ts and statements includes: financial financial financial all companies IAS, except cash IAS, except cash should financial financial sheet and income IAS, except cash financial Comparable to format of statements statements statements incorporated flow statement flow statement statements include statements statements statement flow statement statements IAS, except that: • balance sheet; financial includes: includes: includes: under the and the statement and the statement includes: includes: includes: required. and the statement includes: • statement • Commercial of changes in of changes in balance sheet of changes in ; • balance sheet; • • balance sheet; s • balance sheet; • balance sheet; Code. are treated equity are treated is Comparable to equity that is not a • No requirement • income • • • statement of non-owner • income • • statement of as parts of the as parts of the composed of • balance sheet; IAS, but a required part of balance sheet; for statement of income statement income movements in equity; statement; profit and loss; notes to the notes to the the balance standard format the financial non-owner statement; statement; • income • income • appendix. • statement of Financial Financial sheet, the profit prescribed by the statements. movements in • statement of statement; statement; • ; and • statement of changes in Statements. Statements. and loss • cash flow Accounting Law equity; account, the changes in the A determined non-owner equity; statement; • (further “AL”) and A particular format • • notes to the financial supplementary capital notes to the notes to the • Particular format for movements in • notes to the Prescribed format Comparable to financial the Company of financial financial statements. notes, and the • explanation to formats for presentation is equity; financial is required to be IAS, but a core • cash flow statements Law. statements issued statements used. format prescribed business report. the financial by the Ministry of presentation No particular format or mandated. statements; statement (called • cash flow by the EAL and statements. The formats used Finance is mandated. order for presentation • accounting • ‘additional The Movement in statement; and A management Commercial Simplified • notes to the by banks and mandatory. The mandated. policies. annual report is Particular format information’). Equity and Cash Annual business report is not a Code. The financial financial formats used by • notes to the composed of for presentation is Flow Statement report presents a Encouraged to present a All statements required formats used by statements institutions and credit institutions financial the balance mandated for Companies, which are regarded as review by review by management of have a standard component of the credit institutions insurance and insurance statements. sheet, the profit banks and other are obliged to part of the notes management of financial and operating form, including annual accounts. and insurance Besides the companies are companies are and loss companies. have an annual (not required in financial and activities, outside the analytical report of companies are financial prescribed in prescribed in Notes to the account, and statutory , the case of the operating financial statements. the management prescribed in statement a report separate acts. separate acts. financial the should also consolidated activities; for on financial and separate acts. must be prepared statements are supplementary prepare cash flow financial further operating where the A management presented notes. statement. statements.) specification of activities. A management management of report is a primarily in tabular Publicly traded inclusion in an report is a • Consolidated the company companies should required Particular format format specified required reports on current component of the annual business by the National annual report is also prepare for presentation of report see the component of the composed of period statement of annual accounts. balance sheet and Institute of annual accounts. developments. Law on Statistics. In the changes in equity. income statement Commercial consolidated These Directors’ report mandated. addition requirements Companies. disclosures are balance sheet, should be the doesn’t refer to: attached to the Rules for the required in a textual format consolidated financial notes to the specified by the profit and loss • private, rustic statements. financial account, and statements relevant NAS. and pescatory Detailed formats the farms whose mandated. consolidated of balance sheet, Banks, insurance for the supplementary income statement companies, year do not notes and and cash flow investment funds, exceed 45 000 statement are non-for-profit consolidated LVL business report. described by organizations and relevant • institutions that funded regulations. entities also issue Cash flow are financed the above set of statement should from state financial be presented as budget or statements but part of the municipality information is in supplementary compliance with notes, but it is not relevant NAS compulsory for the applicable for their simplified annual specific activities. report.

The balance sheet and the profit and loss account has a prescribed form based on the law. (See appendix 1 and 2)

Complianc If financial statements The annual The annual All statements Comparable to The annual The annual This Act contains Comparable to Not defined. No requirement The annual The annual The financial (Preface to SAS, e with comply with IAS, this fact accounts shall accounts shall should be IAS. accounts shall accounts shall accounting rules IAS for statement of accounts shall accounts shall statements should 6. Fundamental relevant should be stated. Such a comply with comply with prepared in comply with comply with which are in compliance – comply with comply with comply with Accounting accountin statement should not be Albanian Bulgarian GAAP compliance with Czech accounting Estonian GAAP accordance with other than in audit Macedonian Romanian GAAP Slovak Accounting Assumptions) g made unless there is full accounting law and this fact shall Belarussian Rules law and rules. and this fact shall International report. accounting but this fact is not Law (SAL) and Comparable to standards compliance. and rules. They be stated. of Accounting. be stated. Accounting Companies are regulations and stated. regulations. This IAS. should present a These rules have Standards and required to comply principles and this fact should be In the rare circumstances NAS can not be true and fair view substantial Where the annual based upon with the fact shall be Non-compliance stated in the first where non-compliance with applied before its of the entity’s distinction from accounts do not reliable Accounting Act stated. with the general part of the notes. IAS is necessary in order to effective date. financial situation. the International present true and information and all applicable accounting achieve a fair presentation, Accounting fair view of the providing a true regulations – no principles has to Non compliance is disclose: Standards. accounting entity’s overall view in provision for be disclosed. not allowed. • that management has financial situation, respect: override of laws concluded that the the “true and fair” and regulations in financial statements override in EAL § • of the order to achieve a achieve a fair 18.7 may be income ‘fair presentation’. presentation; applied. Any such producing departure must be capability

3 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

disclosed in the • the • that the financial notes with the developme statements comply with reason for the nt of the IAS except for the departure and its assets, departure necessary to effect on the • the financial achieve a fair assets, liabilities, situation presentation; owners` equity and the and profit/ loss of future plans • details of the departure the accounting of such and the reasons for it; entity. entities and falling • the financial impact of the under the departure. effect of this Act. When an IAS is applied before its effective date, that fact should be disclosed.

Underlying Going concern, consistency Major Going concern, The main Comparable to Comparable to Major The ‘basic Comparable to Going concern, Going concern, Major Major Comparable to (Preface to SAS, assumptio and are presumed considerations consistency and accounting and IAS. IAS. Usually form considerations accounting IAS. consistency and matching, considerations considerations IAS. 6. Fundamental ns to be followed - otherwise are: basis are reporting over substance is are: principles’ shall be accruals are prudence and are: are: Accounting disclosure required. defined in the principles are as applied (but not enforced when presumed to be consistency Going concern, Assumptions)

Accountancy Act follows: defined as a preparing the followed. defined as • going consistency and Comparable to Any significant uncertainties • going concern, • • as a part of the 12 general principle). going concern, annual report and fundamental concern, Prudence; accruals are IAS. about the entity’s ability to • • completeness; Any significant comparability, basic principles Less emphasis on in the course of accounting Although presumed to be continue as a going • • uncertainties consistency, underlying the going concern. comparability, . concepts. • prudence is followed – concern should be • • accuracy; about the entity’s comparabilit carry-forward, accounting in Any significant The basic recognized as a otherwise disclosed. • consistency, ability to continue y, • accruals and Bulgaria. • uncertainties accounting In general principle in the disclosure accrual as a going prudence. about the entity’s • principles may be emphasis on • RAS, the required. Any significant concept, which , concern should be consistency, ability to continue departed from prudence is higher detailed rules uncertainties implies disclosed. as a going • disclosure, only in the manner than in IAS. • do not always Any significant about the entity’s recognition of materiality, concern should be regulated in this reflect it. uncertainties ability to continue revenues and disclosed. • accruals and Act. about the entity’s as a going costs as they • disclosure, • prudence. Basic accounting Consistency ability to continue concern is not are earned or Major principles are as a going required but incurred. The • accruals and • Going concern considerations going concern, concern should be usually disclosed. revenues and prudence. costs should be are: completeness, • Accruals disclosed. recorded in the authenticity, financial • concept of lucidity, The opening statements of historical consistency, balance sheet the periods to costs continuity, balances can not which they commensurability, be changed. relate. Accrual • accruals prudence, gross concept is concept settlement, item- Any departure optional. A by-item from the company may • concept of evaluation, accounting choose the prudence accruals, principles has to alternative cash substance over be disclosed. basis of • prohibition form, essentiality accounting for of and cost-benefit revenues. compensatio comparison. n Going Concern, being one of the • continuity of IAS fundamental accounts accounting assumptions, is • recognition neither applied at the nor considered in moment of the Belarussian realization law.

• consistency of methods used

Basis for In the first instance, to The enterprise is Accounting An enterprise is Comparable to Accounting Accounting Within the Comparable to Not required to Compliance with The annual Accounting Accounting (Preface to SAS, selection comply with IAS. free to choose the policies are obliged to adhere IAS. policies must policies must framework of the IAS comply with IAS. law and accounts shall policies must policies must 6. Fundamental of way of keeping developed in to strict local comply with comply with accounting policy regulations. comply with comply with comply with SAL Accounting Where there is no specific accountin the accounting, compliance with: accounting Czech accounting Estonian GAAP, the regulations Annual financial Selection of Macedonian Romanian GAAP. and regulations. Assumptions) guidance, policies should g policies but in all the reporting rules, law and which is in line and procedure of statements alternative accounting be selected in order to • Bulgarian Comparable to cases accounting although having regulations. Under with IAS except stocktaking assets (annual accounts) accounting regulations and When there is no ensure that information is: GAAP and IAS, also: policies must right to chose Czech accounting where noted and liabilities; the of legal persons policies stipulated principles and this specific guidance comply with from alternative • relevant to users’ needs; • law is usually below. regulations of should be by the Accounting fact shall be on the approach, • the following Albanian Requirements accounting and preferred over evaluating assets prepared in Act should be stated. in practice considerations Accounting Law. of the IAS, policies in some where there is substance. and liabilities; the accordance with justified by the comparable to should govern • areas, such as: internal major best presentation IAS. reliable in that it is a no specific the selection faithful representation, guidance of the What to do when regulations of requirements of the company’s and application th i llti hi h d t lt f

4 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

reflects substance over guidance of the there is no calculating which do not results of by management form, neutral, prudent NAS. • accounting for specific guidance production costs; generally operations and of the and complete in all revenues and is not specified the cash handling contradict IAS. financial position. appropriate material respects. costs (accrual but in practice regulations shall While making accounting basis vs. cash comparable to be identified. selection of policies and the basis); IAS. alternative preparation of • The determinant accounting financial elements of the policies, prudence statements: accounting accounting policy, concept should be prudence, (straight line any change followed. substance over method vs. thereof, and the form, and accelerated consequence of materiality. depreciation); any change on the • inventory cost profit or loss shall formulae (LIFO, be detailed in the weighted supplementary average and notes. others);

• cost of sales and overheads accounting;

• some other methods and principles of accounting.

Disclosure Disclose the measurement The appendix The Notes shall Must be Comparable to The notes shall The notes shall Based on the Comparable to Accounting Disclose all The notes shall There is no The notes shall (Preface to SAS, of basis used in preparing the shall disclose the disclose the presented as a IAS. disclose the disclose the basic accounting IAS methods significant disclose the equivalent disclose the 3. The Systematic accountin financial statements and following: recognition and separate accounting accounting principles and employed in the accounting accounting provision under accounting of SAS) g policies each specific accounting measurement component of the principles and principles and evaluation rules preparation of the policies with principles and the RAS and the principles and Comparable to policy that is necessary for basis as well as financial valuation valuation defined in this Act, annual financial emphasis on a valuation required valuation • accounting IAS. (In the areas an understanding of the each specific statements or in assumptions used assumptions used an accounting statements should selection from assumptions used disclosure (Annex assumptions used principles and where there are financial statements. accounting policy the analytical in preparing in preparing policy best suiting be disclosed. existing in preparing 7 to the financial in preparing guidelines no SAS, applied for the management financial financial the characteristics acceptable financial statements and financial Appropriate to disclose applied in assistance should preparation of the report, which is statements and statements (EAL and alternatives. statements. Administrators statements and policy for each issue not preparing the be found in the financial submitted, to the conform to the §18.6, Appendix circumstances of Report) is not conform to the covered by existing IAS. financial Include as a part relevant IAS.) statements. tax inspectorate. requirements set 3) and conform to the entrepreneur considered requirements set statements; of the additional out in Accounting the requirements shall be formed adequate (the out in Accounting May be presented as a • All significant information to the valuation and Act and set out in EASB’s and put in writing, notes should Act and separate component of the changes in financial measurement accounting guidelines. which shall disclose the accounting financial statements or in adopted statements. assumptions regulations. specify the valuation regulations. the notes to the used. methods and assumptions used statements (recommended policies must be In practice Presented as a means of in the preparation as the second note, reported in an disclosures are component in the implementing this of the financial immediately following the explanatory note less notes to the Act. statements and statement of compliance to annual financial comprehensive. financial also the with IAS). statements. statements Within the departures from (recommended as framework of the the accounting the second part, accounting policy, principles and the immediately amongst other reasons therefor). following the first things, those Under the RAS part - general rules, (Annex 7 to the information). prescriptions and financial methods statements and characteristic of Administrators the entrepreneur Report) the shall be specified disclosure can be which establish split between two what the places and the entrepreneur disclosure considers required is not significant from an considered accounting point adequate. of view.

Materiality Each material item should Not specified. Financial No such principle Comparable to Headings and Headings and Not specified Comparable to Standard form of Not specified. Headings and Headings and Prescribed format (Preface to SAS, and be presented separately in However statements should exists. IAS. specific items specific items IAS financial specific items specific items for presentation. 3. The Systematic aggregatio the financial statements. headings and be prepared must be must be statement items is must be must be of SAS) n specific items according to the presented in the presented in the defined. presented in the presented in the • There is a Immaterial amounts should must be concept of order prescribed order prescribed order prescribed order prescribed general rule: Comparable to be aggregated with presented in the materiality as in the balance in the balance in the balance in the balance The notes to the IAS. (In the areas amounts of a similar nature order prescribed specified by the sheet and income sheet and income sheet and income sheet and income financial where there are or function and need not be in the balance Accounting Law. statement formats statement formats statement formats statement formats statements no SAS, presented separately. sheet and income prescribed by the prescribed by law. prescribed by AL. prescribed by law. should contain assistance should statement formats law. all facts be found in the prescribed by law. Sub-headings Sub-headings important to an relevant IAS.) may be added in may be added in understanding Sub-headings order to present order to present of the current may be added in material items material items period’s order to present separately separately financial

5 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

material items separately. separately. financial separately. statements.

Offsetting Assets and liabilities should The offsetting of Assets and Assets and Comparable to Offset of assets The offsetting of Revenues and Comparable to Comparable to Assets and The offsetting of The offsetting of Offset of assets (Preface to the not be offset except where assets and liabilities, income liabilities should IAS. and liabilities assets and costs IAS IAS. liabilities, items of assets and assets and and liabilities is SAS, 3. The offsetting is required or liabilities or and not be offset permitted only liabilities or (expenditures), income and liabilities or liabilities or generally Systematic of permitted by another income and should not be except where when there is a income and and receivables expenses, income and income and permitted only SAS) International Accounting expenses is not offset except offsetting is legal right of set- expenses is not and liabilities may extraordinary expenses, is not expenses is not when there is a Standard. permitted. where offsetting is required or off. The offsetting permitted, with the not be offset gains and losses permitted. permitted, with the legal right of set Comparable to permitted by permitted by of income and exception of against one should not be exception of off – specifically IAS. Items of income and The accounting another NAS, or is another expenses is not special cases another (principle offset except special cases only when short- (In the areas should be offset standards and necessary for Belarussian permitted. dealt with in of gross where offsetting is dealt with in term receivables where there are when, and only when: guidelines do not better Accounting Rule. accounting settlement). required or accounting and liabilities are no SAS, deal with understanding of standards and permitted by law. standards and due from /due to assistance should • an IAS requires or exceptions or Items of income the nature of the guidelines. guidelines. the same be found in the permits it; or special cases in and expense activity of the debtor/creditor in relevant IAS.) this regard. should be offset • entity. the same currency gains, losses and related only when from or to the expenses arise from the Belarussian same person in same or similar Accounting Rules the same transactions and events require or permit currency, that are not material. it.

Offsetting of income and expenses is not permitted.

Comparati Unless an IAS permits or The balance sheet The balance Unless the Comparable to Comparative Comparative Comparable to Current Comparative Comparative Comparative Comparable to (Preface to the ve requires otherwise, and the income sheet, the income Belarussian IAS. information should information The balance IAS accounting year information should information information IAS, except that SAS, 3. The informatio comparative information statement should statement and the Accounting Rules be disclosed in required sheet, the income and at least one be disclosed in required required. reclassification of systematic of n should be disclosed in contain cash-flow permits or respect of the statement and the previous year data respect of the comparative SAS) respect of the previous information in statement should requires previous period Comparable to cash-flow have to be previous period Comparative If restatements amounts is not period for all numerical respect of the contain otherwise, for all numerical IAS comparative statement should presented in the for all numerical information shall are made, allowed. Comparable to information in the financial previous period. comparative comparative information in the information shall contain annual financial information in the be restated. disclosure is IAS. (In the areas statements. information in information should financial be restated. comparative statements. If it is financial Disclosure is required, of the where there are respect of the be disclosed in statements. Disclosure is information in impossible to statements. required of the nature of the no SAS, Comparative information previous period. respect of the required, of the respect of the compare data of nature of the restatement. assistance should should be included in Comparative previous period nature of the previous period. current and Comparative restatement. be found in the narrative and descriptive When the information should for all numerical restatement. When the previous periods information should When it is relevant IAS.) information when it is presentation or be included in information in the presentation or because of be included in impracticable to relevant to an classification of narrative and financial classification of changes in narrative and state the understanding of the items in the descriptive statements, items in the accounting descriptive comparatives the current period’s financial financial information when except cash flows financial methodology, information when reasons have to statements. statements is it is relevant to an and statement of statements is information on it is relevant to an be disclosed. amended, equity. understanding of amended, When the presentation or recalculations has understanding of comparative the current comparative classification of items in the to be reflected in the current amounts should period’s financial amounts should financial statements is the Notes about period’s financial be reclassified to statements. be reclassified to amended, comparative the annual statements. meet the meet the amounts should be No reclassification financial requirements of requirements of reclassified, unless it is of comparative statements. When the the new reporting the new reporting impracticable to do so. The amounts is Together with the presentation or format. format. nature, amount of, and allowed. recalculated data classification of reason for any used for items in the reclassification should be comparison, there financial disclosed. must be statements is presented the amended, When it is impracticable to data calculated comparative reclassify comparative assuming no amounts are not amounts, disclose the changes in reclassified. In reason for not reclassifying accounting such a case and the nature of the methodology information changes that would have during the allowing been made if amounts were . comparison of reclassified. current period’s financial statements with not reclassified prior year financial statements should be included in the notes to the accounts.

Classificat Enterprise can choose A distinction A distinction An enterprise Comparable to The prescribed The current/non- The division of the Comparable to Separate No specific The current/non- The current/non- Enterprises (SAS 24, 9) ion as to whether or not to present between current between current must present IAS format regulates current distinction balance sheet, as IAS. classifications for requirement – but current distinction current distinction should present Current and non- current/no current and non-current and non-current and non-current current and non- the classification is mandatory. well as further current and non- financial is mandatory. is made in the current and non- current assets and n-current assets and current and assets and assets and current assets and of assets. The rules regarding current assets and statements prescribed format current assets and current and non- non-current liabilities as liabilities should liabilities should current and non- current/non- Assets and the contents of the liabilities are formats described Assets and of balance sheet. current and non- current liabilities separate classifications. be made on the be made on the current liabilities current distinction liabilities are individual items is required. in the Accounting liabilities are current liabilities are required to be ff ff

6 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

face of the face of the as separate is mandatory. presented in order contained in Act specify presented in order Assets and as separate items classified and Where this distinction is not balance sheet, balance sheet, classifications. of their liquidity. Schedule No. 1. separate heads of their liquidity. liabilities are in the prescribed disclosed made assets and liabilities based on 12 based on 12 Assets and for fixed assets presented in order format of financial separately. should be presented months after the months after the The regulatory liabilities are The notes to Assets shall be and current The notes to of their liquidity. statements broadly in order of their balance sheet balance sheet bodies in each presented in order financial divided into assets. financial (except long-term Short –term liquidity. date for recovery date for recovery industry of their liquidity. statements shall invested assets statements shall The notes to receivables are liabilities are those or settlement. or settlement. established official disclose and current assets disclose financial presented under which are going to For each and liability The notes to charts of information about on the basis of information about statements shall current assets) be settled within item that combines financial Assets and accounts, which the recovery or their purpose and the recovery or disclose the split one year. amounts expected to be statements shall liabilities are prescribe strict settlement of utilization. settlement of of amounts to be Assets and recovered or settled before disclose presented in order separate monetary non- In the balance monetary non- recovered or liabilities are and after 12 months from information about of their liquidity. classification of current assets and sheet, equity, current assets and settled between generally the balance sheet date, the the recovery or current and non- liabilities. provisions, liabilities. current (less than presented in amount expected to be settlement of current assets and liabilities, and one year) and descending order recovered or settled after monetary non- liabilities. accrued expenses non-current (more of their liquidity 12 months should be current assets and and deferred than one year). (from fixed assets disclosed. Exception: A liabilities. income shall be to cash) peculiarity of entered among presentation of liabilities. the financial reports by Byelorussian corporate entities is non-separation of current and non-current and payable.

Current A current asset is an asset A current asset is Current assets are A current asset is Comparable to Comparable to Comparable to A current asset is Comparable to Comparable to Not specified - but Comparable to Not specified, but Comparable to (SAS 24, 5, 6) assets which: an asset, which is listed in the an asset which: IAS. IAS. IAS. an asset, which is IAS IAS. financial IAS. in practice is IAS. Comparable to expected to be Accounting Law expected to be statements comparable to IAS. • is expected to be • is expected to realized within 12 and comprise of: realized within 12 formats described IAS. realized, sold or be realized, months of the months of the in the Accounting consumed in the normal • inventory- sold or balance sheet balance sheet Act include course of the enterprise’s materials, consumed in date. date. inventories, operating cycle; finished goods, the normal therein. receivables (other stock, work in course of the than long-term), • is held primarily for progress etc.; enterprise’s short term trading purposes or for operating cycle; the short-term and is • short-term investments and expected to be realized receivables- • is held primarily cash under within 12 months of the expected to be for trading current assets balance sheet date; or recovered purposes or for heading. within 12 the short-term • is cash or a cash months after the and is expected equivalent asset, which is balance sheet to be realized not restricted in its use. date; within 12 months from the All other assets to be • short-term balance sheet classified as non-current. investments- date; or held primarily

for trading • is cash or a purposes or cash equivalent expected to be asset, which is realized within not restricted in 12 months after its use. the balance sheet date; and All other assets should be • cash in hand classified as non- and at bank current. accounts.

Current A liability is classified as A liability is Current liabilities A liability is Comparable to A liability is Comparable to A liability is Comparable to Comparable to Not specified – in Comparable to Not specified, but Comparable to (SAS 24, 9, 11) liability current when it: classified as include: classified as IAS. classified as IAS. classified as IAS. IAS. practice failing IAS. in practice is IAS. Short-term current when it is current when it: current when it: current when it is due before one comparable to liabilities are • is expected to be settled • trade creditors due to be settled due to be settled year. IAS. liabilities to be in the normal course of • is expected to • is due to be within 12 months within 12 months settled within one the enterprise’s operating • short-term loans be settled in the settled within 12 of the balance of the balance Publicly traded year. cycle; or normal course months of the sheet date. • sheet date companies should advances from of the balance sheet show current Long-term • is due to be settled within customers enterprise’s date ; or portion of long- liabilities are 12 months of the balance operating cycle; • liabilities due to term liabilities liabilities to be sheet date. or • represent the state. current part of separately under settled within a Long-term liabilities should • ‘current liabilities’ period exceeding is due to be long term loan continue to be classified as settled within 12 (i.e. part of loan, heading. one year.

non-current, even when months of the which will be they are due to be settled date of the repaid within 12 within 12 months of the liability months).

7 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

balance sheet date, if: recognition.

• the original term was for Long-term a period of more than liabilities should twelve months; continue to be classified as non- • the enterprise intends to current, even refinance the obligation when they are due on a long-term basis; and to be settled within 12 months • that intention is of the balance supported by an sheet date, if: agreement to refinance, or to reschedule • the original term payments, which is was for a period completed before the of more than financial statements are twelve months; approved. The above Any amount excluded from statements do not current liabilities on this relate to trade basis should be disclosed, payables that are together with the classified as justification. current liabilities.

General Disclose prominently: Disclose Disclose Disclose Comparable to Comparable to Comparable to Disclose Comparable to Comparable to Generally Comparable to Comparable to Disclose: (No SAS covers disclosure prominently: prominently: prominently: IAS. IAS. IAS, except it is prominently: IAS. IAS except that: comparable to IAS. IAS this area directly) • name of enterprise or s presented in IAS. Best current other identification; • name, legal • name, legal • name of In addition the • introduction to • the financial No consolidation name of practice: form, country of form, country of enterprise or following • annual accounts name of statements Require accounts are enterprise or • whether the financial incorporation incorporation other information should or in management enterprise or can not be disclosure of all prepared under other Disclosures: statements cover the and address of and address of identification; be disclosed: report. other presented significant RAS. identification; individual enterprise or a the enterprise; the enterprise; • • • identification; for more information, which name of group of enterprises; the balance the date of • whether the • • than one is relevant to the The nature and enterprise or the balance the balance sheet date or establishment • whether the financial • the balance sheet date or company, understanding of principal activities other sheet date and sheet date and the period of company; financial statements the period covered by the • financial financial are presented in identification the period the period covered by the statements cover the financial statements; • names of statements statements. management covered by the covered by the financial cover the individual • the domicile shareholders, can only be report financial financial statements; individual enterprise or a and legal form • the reporting currency; which own 20% presented statements; statements; enterprise or a group of of the and • the reporting or more of in national group of enterprises; enterprise, • the date of • the date of currency; and registered currency; • the level of precision enterprises; country of signing the signing of the capital, the • amounts • the balance used in the presentation • the level of incorporation financial financial amount of their • the balance presented sheet date or of the figures in the precision used and address; statements; statements. ownership in sheet date or in the the period financial statements. in the percent, the period financial covered by the • a description of presentation of In addition the notes should description of covered by the statements financial the nature of the figures in disclose: changes in the financial can only be statements; the enterprise’s the financial accounting statements; in single operations and statements. • the domicile and legal period provided units or • the reporting its principal in business • the reporting thousands currency; and form of the enterprise, In addition the activities; register; currency; and of units of country of incorporation notes should the national • the level of • the name of the and address; disclose: • description of • the level of currency – precision used parent • organization precision used in the a description of the • the domicile litas. enterprise and structure and its in the presentation of nature of the enterprise’s and legal form ultimate parent significant presentation of financial operations and its of the enterprise of the changes during the figures in statements (full principal activities; enterprise, group; accounting the financial disclosure, country of • the name of the parent period; statements. condensed • the balance incorporation enterprise and ultimate disclosure) sheet date or and address; • parent enterprise of the names of In addition the the period group; and members of notes should • the domicile covered by the statutory and disclose: and legal form financial • either the number of supervisory of the statements; employees at the end of boards as of enterprise, the period or the average balance sheet • the domicile country of • the reporting for the period. date; and legal form incorporation currency; of the and address; • average enterprise, • the level of number of country of • a description of precision used employees split incorporation the nature of in the into and address; the enterprise’s presentation of management operations and the figures in and employees, • a description of its principal the financial amount of the nature of activities; statements; personal costs the enterprise’s per mentioned operations and • the name of the • whether the group, bonuses its principal parent financial paid to activities; enterprise and statements members ultimate parent cover the supervisory and • the name of the enterprise of the individual

8 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

statutory parent group; enterprise or a boards; and enterprise and group of ultimate parent • the average of enterprises; • amount of enterprise of the employees for loans, group; and the period, • ownership borrowings, management structure; guarantees • either the from it; given to number of • type of format of shareholders, employees at balance sheet, partners, the end of the income members of period or the statement and supervisory and average for the funds flow statutory period. statement; boards. • name of the general director and other members of the board of directors.

Reporting Financial statements should Generally, Financial Reporting period A 31 Dec year- Czech Accounting The financial year Financial Comparable to Comparable to Financial The financial year The financial year (SAS 23) Period generally be presented at financial statements should for enterprises is end is not Law specifies that is 12 months. The statements should IAS. IAS. statements should is 12 months from is 12 months from The Slovak Financial least annually. statements should generally be regarded as being mandatory. the accounting following generally be generally be January 1 to January 1 to Accounting Law statements need be presented at presented at least from January 1 to However the tax year should be accounting presented presented December 31. December 31. specifies that the to be presented at In exceptional least annually. annually. December 31. year-end is 31 January 1 to periods are annually in each annually, except accounting year least annually. No circumstances, where the Any exceptions Dec with returns December 31. permitted: case. in the first Subsidiaries and The financial should be January exceptions balance sheet date is The financial year The first reporting should be due by 30 April in reporting period parent companies statements are 1 to December 31. possible. changed and the financial is 12 months for year for the new The accounting authorized by the following year. Jan.1 – Dec.31; after incorporation must use the mandatory to be statements are presented the year ended 31 company (that are period of an Ministry of April 1 – March or after change in same financial issued at least The accounting for a period longer or December. registered until the accounting entity Finance. 31; a reporting period, year. annually and in period of an entity shorter than one year, October 1st) starts commencing it’s July 1 – June 30; in which cases case of merger or commencing or disclose: In the case where from the date of business activity Oct.1 – Sept.30. reporting period No exceptional cease of activity. terminating its financial the state or terminating its could be shorter circumstances are business • the period covered by the statements cover registration and business Permission shall or longer than 12 permitted. The Ministry of activities, may be financial statements; period ends on activities, may be be sought from months. Finance can shorter but not shorter/longer December 31, for shorter but not • the Estonian decide that longer than 12 the reason for a period than one year this companies that longer than 12 Ministry of financial months. In those other than one year fact should be are registered months. In those Finance to use an statements can cases the being used; and separately after October 1st cases disclosure accounting period also be issued at disclosure is disclosed. the first reporting as under IAS. • the fact those other than those dates other than similar as under year starts from comparative amounts for listed above (EAL the end of the IAS. the date of the the income statement, §17.2) financial year. state registration changes in equity, cash and ends on the flows and related notes Subsidiaries and December 31 in are not comparable. parent’s must use the next year. the same financial

Budget year. No companies submit permission is on monthly, required for these quarterly and changes (EAL annual basis their §17.4) financials to the high-level The accounting authorities. period of an accounting entity Banks provide commencing it’s National Bank of business activity, Belarus with their changing its fiscal daily balances year or and statutory terminating its audited balances business on annual basis. activities, may be shorter than 12 months, but may not exceed 18 months (EAL §17.3)

General Disclose: Comparable to Disclose: Financial Comparable to Comparable to Comparable to The following shall Comparable to Not defined. Disclose: Only contingent No such (Preface to the disclosure IAS (disclosed in statements of IAS. IAS except IAS (disclosed in be introduced in IAS. assets and disclosures are Comparable to SAS, 3. The • restrictions on title to • contingent s – the appendix) Belarussian disclosure the notes). the supplementary • security given in liabilities (if required as per IAS except the Systematic of assets; assets and balance corporate regarding pension notes: respect of possible to the prescribed disclosure SAS) Amounts contingent sheet companies and and retirement Amounts liabilities; quantify) and format of the regarding pension Comparable to • security given in respect committed for liabilities, financial plans, which is not committed for amounts financial and retirement IAS, except for: of liabilities; future expenditure quantified if • institutions are not specified. future expenditure • Of the liabilities contingent committed for statements. plans is not is disclosed in the possible; liabilities; • the methods of providing legally required to is disclosed in the entered in the future capital specified. In • no management comprise the balance sheet, addition the for pension and • subsequent management • expenditure. requirement report. following the full amount restrictions on following retirement plans; events. report. to disclose information of the liabilities, title to assets; disclosures are the methods • contingent assets and generally the remaining specified: of providing contingent liabilities, disclosed maturity of for pension di t th

9 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

quantified if possible; and according to the which is longer and International than five years; • Commitments retirement • amounts committed for Accounting the full amount from the plans; future capital Standards: of the liabilities privatization expenditure. which are contracts; • restrictions on collateralized by • title to assets; a lien or similar subordinated liabilities; • rights, indicating security given in the type and respect of form of such liabilities; collateral; and • the methods of • the full amounts providing for of any financial pension and liabilities, which retirement are of plans; importance from • contingent the point of view assets and of evaluating contingent the financial liabilities, situation of the quantified if entrepreneur, possible; and but are not shown in the • amounts balance sheet. committed for future capital expenditure.

Specific As a minimum on the face The balance sheet As a minimum the As a minimum on Comparable to Prescribed format The balance sheet The division of the Balance Sheet: As a minimum on As a minimum on The balance sheet Prescribed format (SAS 24) As a disclosure of the balance sheet: format complies information to be the face of the IAS. for the balance format complies balance sheet, as the face of the the face of the format complies As per IAS of financial minimum on the s – with IAS disclosed on the balance sheet: sheet is with IAS well as further balance sheet: balance sheet: with IAS statements covers face of the • property, plant and Tax liabilities and balance requirements face of the mandatory. The requirements rules regarding • Intangible requirements. all IAS items balance sheet: equipment; • property, plant assets to be sheet except that the balance sheet is balance sheet (EASB, Balance the contents of the assets required. and equipment, disclosed together differences as follows: format is more Sheet Accounts). individual items is • Formation cost; • intangible • intangible assets; including leased • with other (negative or detailed than contained in Fixed assets assets; In the notes • property, plant • property, plant assets; • payables / • positive) arising under IAS. Schedule No. 1. Intangible further sub- and equipment; financial assets; and equipment; • Long term • receivables from the assets; tangible fixed classifications in a • construction in financial • • equity-accounted exchange rates is assets; intangible • intangible progress; Balance sheet investments • Tangible No requirement manner investments; also included. assets; assets; items as assets; • long-term for presentation of appropriate to the • intangible described in • Inventory financial assets; minority interests. enterprise. In • long term • inventories; • financial assets; assets; Schedule No. 1 • Financial long addition for each investments; may be further • Accounts • line item the • trade and other term assets; long-term • investments; • financial assets; divided. receivable amounts payable • receivables; receivables; treasury stock; • Amounts to and receivable • inventories; • inventories; • Cash • • • cash and cash Invested assets, receivable after inventories; from parent inventories; current assets, enterprise, fellow equivalents; • • • one year; trade and other trade and other and deferred Share capital • trade and other subsidiaries and • non-current receivables; receivables; and reserves • • trade and other payables; expenses and Stocks and receivables; associates, and receivables; contract in • cash and cash • cash and cash accrued income • other related • Provision progress; • short-term • trade and other tax liabilities and assets; equivalents; equivalents; shall be shown in parties, should be the balance sheet securities; disclosed. current • Long term • • provisions; • • Amounts receivables; trade and other trade and other as assets. liabilities • cash and cash receivable • payables; payables; equivalents; • short term non-current interest- Assets shall be • within one year; Current investments; bearing liabilities; • tax liabilities • tax liabilities divided into liabilities • Investments • deferred and assets; and assets; • minority interests; and invested assets and term expenses; • cash and cash and current assets Comparable to • • deposits; equivalents; • issued capital and provisions for provisions; on the basis of IAS. • equity; bad and their purpose and • • prepaid reserves. • current and Cash at bank doubtful debts; utilization. • provisions; expenses and non-current and in hand; Additional headings and accrued • minority interest-bearing • subtotals should be Inventories, • Capital; long-term revenue; provided where necessary interests; and liabilities; receivables, liabilities; for a proper understanding. securities and • Share premium • equity: • issued capital • issued capital • short-term Other line items may be liquid assets shall account; and reserves. and reserves. liabilities; • prescribed by specific IAS. be placed in the basic • Revaluation capital, Amounts payable Additional group of current • Either on the face of the reserve; accruals and to and receivable headings and assets. balance sheet or in the deferred • share from parent subtotals should In the balance- notes - further sub- • Reserves; income. premium, enterprise, be provided where sheet equity, classifications in a manner subsidiaries and necessary for a provisions, • • appropriate to the Profit (loss) Additional reserves, associates, and proper liabilities, and enterprise’s circumstances. brought headings and other related understanding. accrued expenses forward; subtotals should • retained and deferred For each line item, parties should be Other line items be provided by earnings, • segregate amounts payable stated on the face may be prescribed income shall be Provisions; medium and large • revaluatio to and receivable from of the balance by specific entered among size companies. • Postponed n, parent enterprise, fellow sheet. statutory rules. liabilities. taxes; subsidiaries and associates • Either on the face Equity is current and other related parties. • of the balance composed of Amounts year profit sheet or in the issued capital - payable after or loss;

10 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

sheet or in the issued capital - one year and notes - further decreased by the long term • provisions; sub-classifications issued but unpaid liabilities; • in a manner capital, capital long-term appropriate to the reserve, • Amounts liabilities from enterprise’s accumulated profit payable within financing; one year and circumstances. reserve, • long-term evaluation short-term liabilities. operating reserve, and the liabilities; balance sheet • All of these profit or loss figure • short-term of the subject accounts should be further liabilities from year. financing; classified into a Liabilities are the smaller account • trade and other acknowledged on the face of payables; payments to be the balance performed in cash sheet. • accrued and arising from expenses and supply, work, This format is set deferred service and other by supervisory revenue; contracts which bodies and can are related to not be changed. Small enterprises supplies, services that do not belong and the provision to a group for of money already which a performed by the consolidated supplier, balance sheet is entrepreneur, prepared, should service provider, include in their creditor or the balance sheet at party extending a least the items loan, and above, while accepted and medium size acknowledged by enterprises should the entrepreneur. also disclose There are long- more details on term and short- items of fixed term liabilities. assets and inventories.

Additional disclosures (further sub- classifications) should be provided either on the face of the balance sheet or in the notes where necessary and prescribed by specific IAS. For each line item, segregate amounts payable to and receivable from parent enterprise, fellow subsidiaries and associates, and other related parties.

Specific For each class of shares, Not specified. Not specified. No specific Comparable to Comparable to Comparable to In the case of a Comparable to Should be For each class of Comparable to On the face of the Comparable to Comparable to disclosure disclose: disclosure IAS. IAS. IAS (EAL share company, IAS. disclosed: shares, disclose: IAS. balance sheet IAS. IAS, except for: s –share requirements Appendix 3). the number and only a disclosure • • • capital the number of shares exist. face value of • structure of the number of is made regarding authorized; shares with a capital, shares nominal value of proposed but breakdown by indicating subscribed; share capital not formally • the number of shares types of shares amounts of issued and paid approved; issued and fully paid, and • par value of shall be indicated common and out of total value issued but not fully paid; subscribed in the preferred of share capital shares; • the par value per share supplementary stocks, issued. or that the shares have notes. • the number of • state owned In the notes, no par value; shares with capital, information are privileges. presented in • a reconciliation of the • number of relation with the number of shares shares, foreign investors outstanding at the only: percentage beginning and end of the • uncalled of ownership (%), year; amounts and contribution

11 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

amounts and contribution • and capital called amounts kind/cash, rights and restrictions; unpaid, increase/decrease • separately during the year, shares in the enterprise disclosing the conversion debts held by the enterprise largest to shares, if any. itself or by its shareholders or subsidiaries or its debtors. associates; • • The possibility arrears of cumulative of converting dividends; debts into • dividends proposed but shares must be not formally approved; discussed. and

• shares reserved for future issuance.

Specific Provide a description of the The nature and Not specified. No specific Comparable to Basically Not specified. The non- Comparable to Not defined. Not specified All types of equity Not specified. Comparable to Obligatory disclosure nature and purpose of each the purpose of the disclosure IAS. comparable to distributable IAS. must be identified IAS. disclosures of s – other reserve within owners’ reserves are requirements IAS. capital reserve and disclosed in equity: equity equity. established by exist. The and the non- the financial • Basic capital – law. breakdown and distributable profit statements, share capital, movements of reserve broken including: components of shareholders’ down per legal • Share premium, other equity is titles should be capital, reserves, presented on the presented in the revaluation • Reserves face of statement supplementary reserves, other (statutory of changes in notes. funds, etc. reserves, other equity. reserves),

• Retained earnings,

• Revaluation (separately disclose):

• Revaluation of share capital,

• Revaluation of share premium,

• Revaluation of reserves,

• Revaluation of retained earnings);

• Current year profit or loss.

Statement Present a separate Not specified. Present a The equity Comparable to Statement of Comparable to Not specified. Comparable to Should disclose: Disclosure is Comparable to Statement of Not specified. of component of the financial separate statement has IAS. changes in equity IAS (EAL, IAS. required in the IAS. changes in equity changes in statements showing: component of the four columns: is required as a Appendix 3), • information notes of is required as part equity financial opening balance, part of the notes. except information on changes movements in the • of the footnotes in • the net profit or loss for As per IAS statements debit turnover, The requirement about non- in capital if equity balances. a prescribed table the period; showing: credit turnover, is comparable to monetary these No separate • Not format. The and closing IAS. In addition contributions and changes component of the applicable requirement is • each item of income or • a reconciliation balance with rows disclosure dividends must be have financial comparable to expense, gain or loss between the showing regarding added. occurred, statements, IAS. which is recognized carrying amount components of distributions of including the except for publicly directly in equity and the of each class of equity. profit and how reason for traded companies. total of those items equity capital, loss will be such (irrespective of format share premium Publicly traded covered. changes. chosen); and and each companies are

reserve at the No recognition required to • the cumulative effect of beginning and directly on equity prepare a prior period adjustments. at the end of the is allowed except separate • Either within this statement, period, transactions with component of the Not or in a separate note, disclosing each owners and grant financial applicable disclose: movement; received statements specifically in showing: • Not • • the net profit or order to improve applicable capital transactions with • owners; loss for the the capital of the equity opening period; company. balance as previously

12 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

reported; • the balance of • the balance of accumulated profits at accumulated • effects of • the beginning and at the profits at the changes in Not end of the period, and beginning and accounting applicable the movements for the at the end of the policies;

period; and period, and the • movements for effects of • a reconciliation between the period; corrections of the carrying amount of fundamental each class of equity • each item of errors; capital, share premium income or • Not and each reserve at the expense, gain • restated equity specified beginning and at the end or loss which is opening of the period, disclosing recognized balance; each movement. directly in equity • and the total of movements in These disclosures will all equity those items usually be provided in a (irrespective of balances; columnar format, which format chosen); • the net profit or reconciles between the and opening and closing loss for the balance of each element • the effect of period; within shareholders’ equity. changes in • equity closing Alternatively, a separate accounting balance. statement may be prepared policies. which includes only the first category and the items in These disclosures the second category are are to be provided shown in the notes to the in a columnar financial statements. format where the opening and closing balance of each element within shareholders’ equity is reconciled.

Specific At a minimum, on the face Comparable to At a minimum, on On the face of the Comparable to Prescribed format Comparable to At a minimum, on Profit and loss For profit and loss At a minimum, on Comparable to Comparable to The income (SAS 25) At a disclosure of the income statement, IAS. the face of the income statement, IAS. for the income IAS. the face of the statement: statements format the face of the IAS. IAS statement should minimum, on the s – income disclose: income statement, disclose: statement is income statement, is defined, income statement, be presented in a face of the income The income statement disclose: mandatory. The The income disclose: • Turnover including the disclose: mandatory statement, • revenue; • revenue; statement formats income statement statement formats following captions: prescribed format, disclose: • revenue; • revenue; • • revenue; in the AL comply format is more in EAL comply Cost of Sales which is more • results of operating • results of with IAS • Net sales detailed than with IAS • Sales and detailed than activities; • operating operating • operating • Selling costs • cost of sales; disclosure revenues and under IAS. The disclosure services under IAS. This expenses; activities; format presents expenses; requirements. format presents capitalized own • finance costs; requirements. • Administrative (turnover from • gross profit; expenses by sales of goods the expenses by products or • financial • finance costs; • financial expenses An enterprise can • nature. and turnover • nature. services; share of profits and income/expens An enterprise can income/expens distribution choose between losses of associates and • profit or loss choose between • Other operating from services costs; es; Disclosure of es; the cost by nature Disclosure of • Purchase value joint ventures accounted from ordinary the cost by nature income rendered); revenues from or cost by function turnover (sales) or cost of goods for using the equity • extraordinary activities; or cost by function • extraordinary • administration main activity of • format. should be made sold; method; income/expens format. income/expens • Income from Cost of goods expenses; the company by chosen es; • extraordinary es; subsidiaries and sold and Dividends • divided between • other operating segments Gross profit; • tax expense; items; Dividends associates services proposed are foreign activities income; (generally product • financial result proposed are • financial result rendered (raw shown in an • Operating • • and Czech • or geographical profit or loss from before taxation; net profit or loss shown in an before taxation; Income from materials, allocation of profit expenses; activities. • other operating area). ordinary activities; for the period; allocation of profit securities and consumables report (a • tax expense; • tax expense; long term loans and goods for expenses; • Operating profit • extraordinary items; Income allocation Disclosure of report (a component of the Disclosure component of the resale; services, • approved annual or loss; • net profit or loss and breakdown of personal costs • net profit or loss • Other interest profit or loss on regarding • approved annual works and accounts). minority interests; and for the period. taxes paid is to be divided between for the period. income research); operating dividends per • Interest provided in categories of accounts). activities; share is not • revenues and net profit or loss for the additional employees and • Other interest • required. Gross profit; • other revenues period disclosure that management. expense financial from financing; accompanies • Operating revenues; Either on the face, or in the • income statement. Disclosure Extraordinary expenses • notes: • finance costs; Interest regarding income (selling expense and dividends per • an analysis of expenses expenses; • other expenses share is not • Extraordinary profit or loss on either by nature or general and from financing; specified. expense ordinary function (in either case, administrative activities; expenses); • Profit or loss depreciation and • Income tax amortization, and staff • extraordinary from ordinary • Profit from costs should be • Other taxes gains; activities; operations; disclosed); and • • Net profit or • extraordinary Extraordinary • Other • the amount of dividends loss for the losses; revenues and operations per share, declared or period expenses; (other operating • proposed, for the period profit before revenue; other • Total profit or covered by the financial Additional taxation; operating loss; statements. disclosure expenses); • income tax; requirements are

13 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 1) Republic Macedonia

comparable to IAS. • Financial and • net profit or loss • Taxes on profit; investing for the period. activities • Net profit or (revenue from Either on the face, loss for the financial and or in the notes: an financial year. investing analysis of Either on the face, activities; expenses either or in the notes: expenses of by nature or function. financial and • (SAS 25.5) investing Medium sized activities); and large enterprises • Profit from should break ordinary down revenues activities; into domestic • Extraordinary market and gain; abroad, as well as net revenues • Extraordinary from other losses; enterprises in the group, • Current year associated profit before enterprises, and taxes; others. Furthermore • Income taxes; they should give a breakdown of • Net profit of the interest income current year for from enterprises appropriation. in the group,

associated enterprises, and others.

An analysis of expenses either by nature or function (in both case, depreciation and amortization, and staff costs should be disclosed).

14 Comparison of International Accounting Standards and Lithuanian Accounting Policies

2. Inventories Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 2) Republic Macedonia

Measurem State at the lower of cost Not specified. State at the Measurement at Comparable to Inventory is stated Comparable to Inventory is stated Comparable to In the accounting, State at the lower Comparable to The inventories State at the lower (SAS 4) State at ent of and balance sheet the lower of cost IAS. at lower of NRV IAS (EAL §34). at lower of NRV IAS. inventories shall of cost (stated as IAS are stated at cost of cost and net the lower of cost inventories (NRV). date at the lower and net realizable and acquisition and acquisition be evaluated at real cost, which but provision to be realizable value and net realizable of cost and is permitted cost (purchase NRV is the cost (purchase the price of does not preclude made for any (NRV). value (NRV). Standard cost and retail value. but not obligatory. price plus relating estimated selling price plus relating acquisition, and in the inclusion of diminution in

methods permitted if the costs) or own cost price less costs) or own cost financial abnormal losses) value of inventory Standard cost not Net realizable results approximate cost. Fair value is the marketing mentioned in value – incurred (direct incurred (direct statements – at and net selling is suggested. This amount for which costs and directly expenses (EAL costs and directly actual costs. price (NSP). is not equivalent legislation. Retail comparable to IAS NRV is the estimated selling an asset could be attributed §34). attributed While calculating to the IAS method not price in the ordinary course exchanged, or a production production the actual cost, The costs of definition and will defined in of business less the liability settled, overheads). overheads). earlier inventory purchase of not result in a legislation. estimated cost of completion between acquired shall be inventories may similar valuation. and the estimated costs NRV is the knowledgeable, written off. not include necessary to make the sale. willing parties in transport and Additionally, the estimated selling an arm’s length handling costs if RAS definition of price in the

transaction. not materially cost is not as wide ordinary course of effects assets and as that of the IAS. business less the Cost is calculated financial results. There are also estimated cost of on the basis of the cases when completion and direct costs Work-in-progress general the estimated incurred in the may be carried at administration costs necessary normal course of direct cost of costs are taken to make the sale. the business plus production or into the cost of

an apportionment even at cost of inventories. of overheads. direct materials, if

not materially Standard cost and effects assets and retail method financial results. permitted as per IAS. Standard cost and retail methods permitted only during the year. At NBV is not the balance sheet defined. date such inventories should be valued using general measurement rules.

Inclusion of foreign exchange losses not allowed.

Costs of developed film and software is shown as inventory and charged to P&L exactly in the amount of revenue for the maximum of 36 months after which it is written off to P&L.

Cost Benchmark treatment - use Comparable to IAS Allowed treatment Comparable to Use FIFO, sliding Basic raw material, FIFO, weighted FIFO and weighted When latest The rules Only FIFO, Comparable to According to Comparable to Weighted average purchase price or measureme specific cost, FIFO or benchmark – use FIFO, LIFO, prescribe IAS. weighted average, IAS (EAL §34,5). average cost, Latvian legislation materials and average, and average only nt weighted average cost treatment – Under weighted average application of the or specific weighted average complete plant LIFO. IAS. cost, FIFO and allowed. the cost of the only FIFO and techniques formulas. Albanian or specific cost following identification LIFO is not cost or „elszámoló used in the Specific latest produced average cost LIFO is benchmark LIFO are allowed LIFO not allowed. Accounting Law formulas. treatments: methods are permitted (EAL ár” formulas. methods are process of identification items differ in the Alternative treatment allowed - only the FIFO production and allowed where – not alternative (RAL art. 68) accounting period acceptable. §34,5) allowed for No legislation but LIFO. method is No specific • LIFO; LIFO is not included in the relates to specific treatment. from the prices measuring the practice is: guidance for allowed in and/or cost of permitted. LIFO is not inventories. produced stocks projects. The same cost formula should measurement of • Weighted accordance with permitted. (products) cost No requirement for • The same cost items of inventory be used for all inventories inventories with average; the Hungarian No direct shall be valued in use of the same formula should of the same class, having similar nature and use different nature. accounting law. requirement in the Standard cost and the financial cost formula. be used for all the following to the enterprise. For • Standard cost ‘Act” to use the retail method statements by inventories methods may be inventories with different and deviation same cost for permitted, if the means of the FIFO having similar used: nature or use, different . inventories having results method. In the nature and use formulas may be justified. similar nature and • moving approximate cost. event that stocks to the [SIC 1] use. average or its certain kind enterprise. For prices, moves otherwise in inventories with the enterprise, it different nature • weighted may be estimated or use, different and reflected in the average cost formulas prices, financial may be

15 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 2) Republic Macedonia

statements by may be means of the LIFO justified. • FIFO and method or lever or LIFO. progressive When the LIFO average value, cost formula is concrete price or used the net other methods realizable value corresponding to and the carrying stocks’ movement value of inventory in the enterprise. should be Information on it determined so shall be given in that the difference references between the lower attached to the of two values and Notes relating to the value of the Annual inventories based Accounts; the said on the use of references among LIFO can be other things shall disclosed in the report profit that financial would be earned statements. The by the enterprise CV or carrying should it resort to value: amount of FIFO method in money needed for stock valuation. acquiring certain item at date of balance.

Write down Recognize as an expense in Not specified. Recognize as an Recognize as an Comparable to Comparable to Comparable to IAS Recognize as a Comparable to IAS If accounted stocks Write down to net Comparable to Net realizable Recognize as an Comparable to to net the period in which the write- expense in the expense in the IAS. IAS. (EAL §34). cost (Material cost value exceeds its realizable value IAS. value is not defined expense in the IAS. realizable down or loss occurs - any period in which the period in which the – total costs current market recognized in the under RAS but period in which the value reversal should be recognized write-down or loss write-down or loss method; Other price, the stocks period in which it provisions for write-down or loss in the income statement in the occurs. occurs - any general overheads may be re-valued occurs. diminution in value occurs - any period in which the reversal reversal should be - turnover costs by means of the of inventory are reversal should be Additionally, value occurs. In accordance with recognized in the method), no LCM (lower of cost suggested and are recognized in the of inventories of provisions of the income statement reversal is allowed. or market value) recognized as income statement products and Accounting Law, in the period in method, i.e. expenses in the in the period in goods for resale the write down to which the reversal reporting their period in which it which the reversal (except for used fair value is made occurs. acquisition occurs. occurs. goods kept at sale as at the balance (production) cost or outlets and those sheet date. market price in accounts and planned to be sold statements subject over a number of to which of these years) should be two is less. The written down difference between gradually over a the former value period not and the re-valued exceeding five one is given under years and the extraordinary commencing with charges of the the financial year profit and loss following the year account. of purchase or manufacture.

Disclosure Disclose: No specific Disclosure is not No disclosure Comparable to Disclosure: Disclosure Comparable to The following Disclose: Comparable to Disclose: Disclose: (SAS 4, 24) disclosure required but requirements IAS. required for write Disclose: IAS, however LIFO should be IAS, except with Comparable to • accounting policy and cost • accounting • the accounting • accounting requirements encouraged: exist. • accounting downs of assets does not apply. disclosed on the respect to LIFO. IAS, plus formula adopted; policy and cost policies used policy and cost exist. policy and cost (EAL, Appendix • face of balance additional • accounting accounting formula for valuation formula formula 3). sheet: disclosures of: • classification as policy and cost policy and cost adopted; and cost adopted; adopted; appropriate to the formula formula Inventories: formula • • • Components of enterprise; adopted; • classification as adopted; inventories adopted; classification in • raw material cost/unit of appropriate to pledged as the prescribed • inventories carried at • • classification as • inventory, inventories the enterprise; and security for classification in format of NRV, write- downs and pledged as appropriate to consumables; liabilities; the prescribed balance sheet; specifically

reversals; security for • inventories the enterprise; format of the disclose fixed • • • liabilities; carried at NRV, work in write-downs; balance sheet; inventories production • inventories pledged as • the quantity and write- downs progress; carried at net overhead that security for liabilities; • value figures of • inventories • basis for and reversals, if inventories realizable is not directly the opening and • finished recognized as linked with • apportionment material; carried at net value, write- where LIFO is used, the of overheads. closing production; an expense in realizable downs and inventories difference between • inventories inventories of the period. value, write- reversals; (indirect costs), carrying value and either • goods pledged as any dangerous down and necessary to the lower of cost (as purchased for • security for waste reversal; Not inventories bring the calculated using FIFO or resale; liabilities, if materials, and applicable; pledged as inventory item weighted average) and material any increase • security for to its current NRV, or the lower of immovable • and decrease in Not applicable; liabilities; status or point current cost at the balance property the quantity and of sale sheet date and NRV; and value of intended for • Not applicable • Inventories l

16 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 2) Republic Macedonia

dangerous resale; recognized as • inventories recognized as waste materials • Not applicable an expense in an expense in the period in the subject • prepayments; the period or or operating costs year; • operating costs classified by their nature. contracts in classified by • inventories progress. their nature. carried at NRV, Where LIFO is write-downs, used, the base of difference determination of between carrying NRV; value and either • inventories the lower of cost pledged as (as calculated security for using FIFO or liabilities. weighted average) and NRV, or the lower of current cost at the balance sheet date and NRV.

17 Comparison of International Accounting Standards and Lithuanian Accounting Policies

3. Cash Flow Statements Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 7) Republic Macedonia

Enterprise All commercial, industrial or Cash Flow All commercial, There is no Comparable to All reporting All reporting All enterprises All business All enterprises Banks, insurance No such Not applicable All commercial, (Law on s required business enterprises (not Statement is not a industrial or mandatory IAS. entities. entities. who prepare an enterprises should that are subject to companies, obligations for because a cash- industrial or Commercial to present intended to apply to required part of business requirement to annual report. The prepare cash flow long-form financial investment funds, companies in the flow statement is business Companies, a cash flow employee benefit plans, the financial enterprises except prepare the cash supplementary statements. reporting forms brokers and Republic of not required by enterprises with paragraph 56) statement investment companies and statements. So in insurance flow statement. appendix contains are also subject to dealers in Macedonia. RAS. the obligation of not-for-profit organizations). the Albanian companies, the cash flow cash flow securities, joint the statutory audit Funds Flow Accounting no investment funds, statement. The statement stock companies. . (all joint stock statement – reference and employee benefit form of the cash presentation. companies, other obligatory for guidelines are plans and budget flow statement is In addition other business those companies, established. funded prescribed by Act entities which companies with which need enterprises. on Accounting. have achieved or the equity over 20 audited financial There are no exceeded at least mil. SKK or statements mandatory two of the revenues over 40 according to the requirements to following three mil. SKK). law on prepare cash flow criteria in the Commercial statements. financial year No obligation for Companies preceding the cash flow (paragraph 53). financial year for statement in which the financial consolidated statements are financial drawn up: statements.

• average annual employment – 50 people;

• total assets as at the end of the financial year – 1,000,000 Euro

• revenues and financial income – 3,000,000 Euro

are also required to present a cash flow statement.

Definition Cash on hand and demand Not specified Comparable to Not specified. Comparable to Monetary (cash Comparable to Includes cash on Cash on hand and Not defined. Cash (bank notes Comparable to Not applicable. Comparable to (SAS 24) Cash of ‘cash’ deposits. IAS. IAS. funds) is IAS (EASB, hand, checks, current accounts and coins) and IAS. IAS. on hand, checks, understood to be, Balance Sheet current accounts including foreign domestic and cash at banks and cash in hand Accounts). and short term currency. foreign monetary other financial including stamps (within 1 year) (settlement) units, institutions and vouchers, bank deposits. both on hand and cash in bank at bank or in form including any of money balance on the deposits. current accounts and cash in transit.

Definition A short-term, highly liquid Not specified A short-term, Cash on hand, Comparable to Cash equivalents Comparable to Cash equivalent is Cash equivalent is Not defined. Checks and bills Comparable to Not applicable. Comparable to (SAS 7) Definition of ‘cash investment that is readily highly liquid asset current accounts IAS. are understood to IAS (EASB, understood to be short-term of exchange IAS. IAS. of cash equivalent’ convertible to a known that is readily in national and be short-term Balance Sheet cash on hand, investments with issued by other equivalents in amount of cash, and subject convertible to a foreign currency in assets which can Accounts). cash at banks high liquidity, entities if they are terms of business to an insignificant risk of known amount of bank, special be easily denominated in which when payable within 3 finance comprise changes in value (interest cash, and subject accounts with a converted into a local and foreign converted does months of the instruments that rate risk and credit risk). to an insignificant bank, money in predetermined currency, and not change value date of drawing, may easily and risk of changes in transfer and other amount of cash special accounts. significantly. as well as quickly or in the Guidance notes indicate that value (interest cash-denominated and whose value precious metals, if near future an investment normally rate risk and documents (like is not subject to not included in reliably be qualifies when it has a short credit risk). paid flight tickets, significant tangible assets. translated into maturity of, say, three postal stamps fluctuations over a predetermined months or less from the date Additional etc.) period of time. amount of cash, of acquisition. Equity guidance when the risk is investments are normally indicates that an low that their excluded, unless they are in investment, which value might substance a cash equivalent has a short change prior to (e.g. preferred shares maturity of up to translation into acquired within three months three months from cash. of their specified redemption the date of date). acquisition, Cash equivalent qualifies as cash (not considered to equivalent. be cash):

• monetary assets whether or not they are

18 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 7) Republic Macedonia

set aside for specific purposes with the possibility or obligation to use them for any other payment when there is a shortage of cash;

• time bank deposits subject to short notice;

• short-term bank deposits;

• generally acceptable foreign currencies;

• checks received for redemption;

• bills of exchange received for redemption;

• sight deposits subject to short notice, and short-term deposits in foreign banks denominated in generally acceptable foreign currencies;

• foreign exchange denominated in generally accepted foreign currencies;

• marketable securities quoted on a stock exchange.

These items are recorded as part of receivables, short term investments or short term liabilities, and do not refer to SAS 7–Cash.

Borrowing Bank overdrafts which are Not specified. Comparable to No type of Comparable to Overdrafts are not Comparable to Borrowings are Statutory Not defined. Borrowings are Comparable to Not applicable. Comparable to Bank overdraft– s to be repayable on demand and IAS. borrowing is IAS. included as a IAS (EASB, not part of ’cash’ regulations do not not permitted to IAS. IAS. not included. Bank included in which form an integral part included in cash component of Balance Sheet or ’cash specify, therefore be netted against overdraft in a form cash and of an enterprise’s cash and cash cash and cash Accounts). equivalent’. IAS should be the aggregate of credit line is cash management. equivalents. equivalents. used. balance of cash presented as equivalent and cash regular debt. s equivalents.

Classificati Analyzed between Not specified Analyzed between Not applicable. Comparable to Analyzed between Comparable to Comparable to Comparable to Statement of the Analyzed between Comparable to Not applicable. Comparable to Comparable to on of cash operating, investing and operating, IAS. operating, IAS (EAL IAS. IAS. changes in operating, IAS IAS. IAS. flows financing activities. investing and investing and Appendix 3). financial position investing and financing financing Interest and reports cash flows financing Interest and dividends activities. activities. dividends paid, during the current activities. received and paid may be interests received period from the

19 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 7) Republic Macedonia

classified as operating, are considered as operating, investing or financing, Interest received Cash flows operating. investing and Interest and provided that they are and paid is connected with Dividend received financial activities dividends classified consistently from classified as transactions that is considered as of the enterprise. received are period to period. financing activity. create investing. classified as extraordinary investing, while Cash flows arising from Dividends profit or loss, cash Cash flows arising paid should be taxes on income are received and flows related to from taxed are classified as normally classified as dividends paid are collection and classified as financing. operating, unless they can classified as payment of operating. be specifically identified with investing and interest and Cash flows arising financing or investing financing activity dividends or profit from taxes on activities. respectively. shares and income are income tax classified as Cash flows arising Separate components of a payments are operating. from taxes on single transaction may be reported in the CF income are classified differently. statement on normally classified separate lines. as operating activity.

Direct DM encouraged, but IM Not specified. Both DM and IM Not applicable. Comparable to Not specified, Not specified, but Operating cash Comparable to Indirect method. IM required. Not specified – Not applicable. DM or IM (SAS 26) Funds Method acceptable. are acceptable. IAS. indirect is used in practice flow is presented IAS. Both of them acceptable. flow statements: (DM) or more often in comparable to IAS by IM, investing Publicly traded acceptable Indirect practice. (EAL, Appendix and financing companies – use Indirect method of Method 3). cash flow is of either method funds flow (IM) of presented by DM. allowed. accepted. presentatio n for operating cash flows

Extraordin Classify cash flows relating Not specified Comparable to Not applicable. Comparable to Extraordinary Not specified, but Classify cash Comparable to Not defined. Separate Not specified Not applicable. Comparable to (SAS 26) ary items to extraordinary items as IAS. IAS. accounting events in practice flows relating to IAS. disclosure of cash IAS. Extraordinary operating, investing or are usually comparable to extraordinary flows pertaining to items are financing as appropriate and considered as IAS. items as extraordinary classified as disclose separately. part of operating appropriate to the items is not operating. activities, unless transaction type. required. they can be recorded within financial or investment activities.

Exchange The rate in effect at the date Comparable to The rate in effect Not applicable. Comparable to Comparable to Comparable to The rate in effect These Not defined. Not specified. Comparable to Not applicable. The rate in effect Use middle rate used of the cash flows (permitted IAS at the date of the IAS. IAS. IAS (EAL 26)§. at the date of the transactions are IAS at the date of the exchange rate per for to use an average rate to cash flows. cash flows. translated into cash flows. Bank of Slovenia: transaction approximate the actual rate). LVL at the official s Bank exchange • as of the date of denominat rate on the date of transaction for ed in the transaction. profit and loss foreign items, and currency • as of the balance sheet date for balance sheet items.

Exchange The rate in effect at the date Not specified. The closing Not applicable. Comparable to Comparable to Comparable to Not specified. Not specified. Not defined. Not specified. Comparable to Not applicable. In the case of Middle exchange rate used of the cash flows (permitted exchange rate of IAS. IAS. IAS (EAL §26). IAS. consolidated rate of Bank of to translate to use an average rate to Bulgarian National financial Slovenia: the cash approximate the actual rate). Bank is used to statements cash flows of a translate the cash flow statement not • average foreign flows of a foreign required exchange rate subsidiary entity and the for the period exchange rate at for income the date of the statement cash flows is used • for the foreign as of the operation that is balance sheet an integral part of date for balance operations of the sheet items reporting enterprise.

Cash flows Where equity method used, Not specified. Proportionate Not applicable. Comparable to Comparable to Comparable to Not specified. Comparable to Not defined. Report only cash Comparable to Not applicable. Comparable to Not specified. of report only cash flows consolidation IAS. IAS. IAS (EASB, Equity IAS. flows between the IAS IAS. associates between the investor and the (applied for both Method investor and the and joint investee. associates and Proportionate Guideline). investee. ventures joint ventures) – consolidation is In the case of Proportionate consolidation - include the not allowed under The equity Proportionate consolidated include the venture’s share associate’s/ Czech accounting method is used in consolidation not financial

20 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 7) Republic Macedonia

of the cash flows. venture’s share of law. the separate and allowed. financial the cash flows. consolidated statements cash accounts of the flow statement not venture under required. EAL and EASB guidelines.

Separate Aggregate cash flows Not specified Cash flows Not applicable. Comparable to No specific Comparable to Not specified. Comparable to Not defined. Aggregate cash Comparable to Not applicable. In consolidated (SAS 26) disclosure relating to acquisitions and relating to IAS. requirements. IAS (EAL, IAS. flows relating to IAS financial Classified as of cash disposals should be acquisitions and Cash flow relating Appendix 3). acquisitions and statements, the investing activity, flows presented separately and disposals should to acquisition and disposals of cash flow separate relating to classified as investing be presented disposals of shares in statement is not disclosure not acquisition activities. separately and subsidiaries and subsidiaries, required. In required. s and classified as other business associates, other single company disposals Disclose: investing units is presented business units separate financial of activities. as a part of cash and short term statements cash- • total purchase or disposal subsidiarie flow from investments flows relating to consideration; s and other No additional investment should be acquisitions and business • disclosure is activities. presented disposals of the portion of the required. units consideration discharged separately and shares in by means of cash and classified as subsidiaries, cash equivalents; investing associates and activities. other business • the amount of cash and units are cash equivalents in the No further classified as entity acquired or disclosures investing disposed of; and required. activities, separate The aggregate • the amount of the assets disclosure not cash paid or and liabilities in the required. received as subsidiary or business unit consideration is acquired or disposed of, reported net of summarized by each cash and cash major category. equivalents The aggregate cash paid or acquired or received as consideration is disposed of. reported net of cash and cash equivalents acquired or disposed of.

Non-cash Exclude from the cash flow Not specified Exclude from the Not applicable. Comparable to Comparable to Comparable to Non-cash Comparable to Not defined. Only cash Comparable to Not applicable. Comparable to Not specified. transaction statement investing and cash flow IAS. IAS. IAS. transactions are IAS. transactions IAS IAS. s financing transactions which statement any excluded from the presented in do not require the use of transaction, which cash flow investing and cash, but ensure that they does not require statement, there financing activities are disclosed elsewhere so the use of cash. is no requirement of the cash flow as to provide all of the to disclose. statement. relevant information. No further disclosures of non-cash transactions required.

Reconciliat Disclose the components of Not specified. Comparable to Not applicable. Comparable to Comparable to Comparable to Change on Cash Comparable to Not defined. Disclose the Comparable to Not applicable. Comparable to Not specified. ion with cash and cash equivalents, IAS. IAS. IAS. IAS. by cash flow IAS. components of IAS IAS. balance and present reconciliation to statement agrees cash and cash sheet amounts reported in the to change of Cash equivalents figures balance sheet. on the balance reported in the sheet. cash flow statement, which should be equal to figures presented in the balance sheet.

Amounts Disclose, together with a Not specified. Not specified. Not applicable. Comparable to Not specified. Comparable to Not specified. Comparable to Not defined. Not specified. Comparable to Not applicable. General Not specified. not commentary by IAS. IAS - may be in IAS. IAS requirement to available management, the amount of evidence in disclose in for use by cash and cash equivalents supervised footnotes assets the group held by the enterprise that is industries. with restricted not available for use by the access. group.

21 Comparison of International Accounting Standards and Lithuanian Accounting Policies

4. Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 8) Republic Macedonia

Net Profit Comprises the following Comparable to Comprises the Comprises the Comparable to Comprises the Comparable to Two permitted Comparable to Comparable to Format for profit Comparable to Operating, Prescribed format Comparable to or Loss for components, to be disclosed IAS following following IAS following IAS they must be forms of profit and IAS. IAS. and loss account IAS they must be financial and the of financial IAS, except to the Period on the face of the income components, to components, to components, to disclosed loss account (total specified by disclosed result from non- statements covers disclose statement: be disclosed on be disclosed on be disclosed on separately on the costs and regulations for separately on the recurrent all IAS items additionally: the face of the the face of the the face of the face the income turnover costs each specific type face of the income operations are required. profit or loss from income statement: income statement: income statement: statement (EAL method). of enterprise. statement. separately • profit or loss ordinary activities; and In the notes Appendix 2) and Components are disclosed on the from • profit or loss • profit or loss • operating (EAL §5). the same. All items of face of the income further sub- operating extraordinary items. from from profit or loss income and statement. classifications in a activities; expense manner All items of income and ordinary ordinary • financial recognized in a Recognition of appropriate to the • profit or loss expense recognized in a activities; activities; profit or loss period should be income and enterprises. from period should be included in and • financial included in the expenses is ordinary the determination of the net • Recognition of items; and • extraordinar extraordinar determination of comparable to In the notes for activities; profit or loss for the period income and y items. y profit or the net profit or IAS. each line item, unless an IAS requires or • expenses are • extraordinar loss loss for the segregate gross profit permits otherwise. comparable to y items. Some categories period. amounts of and loss of income and IAS. income and (profit and

All items of expense expense to and loss after income and (bonuses, from parent extraordinar expense financial aid, bad enterprise, fellow y activities); recognized in a debt provisions for subsidiaries and • period should be corporate entities associates, and taxes on included in the and some others) other related profit. determination of recognized in a parties. the net profit or period are not loss for the period included in the unless otherwise determination of required or the net profit or permitted. loss for the period. These Surpluses from categories are revaluation of recorded on fixed assets and respective reserve long-term accounts. investments and profit/loss from translating of foreign operation financial statements are excluded from the net profit or loss for the period.

Extraordina Extraordinary items arise Comparable to Extraordinary Comparable to Comparable to Extraordinary Comparable to In general the Comparable to Not defined. Extraordinary Comparable to In the RAS exists Extraordinary (SAS 18) ry items from events that are clearly IAS items arise from IAS. IAS. profit and loss IAS (EASB, definition is the IAS. items arise from IAS “exceptional” items arise from Extraordinary distinct from the ordinary events that are shall be Income Statement same, but there unique events, items. This events that are items include: activities of the company and clearly distinct considered to be Guideline; EAL, are exact outside the usual appears to be clearly distinct therefore are not expected to from the ordinary such profit or loss Appendix 3). transaction types business of the intended to be the from the ordinary EXTRAORDINAR

recur frequently or regularly - activities of the which is the result which are entity, in particular equivalent of activities of the Y REVENUES examples given are the company and of: determined as caused by: “extraordinary” company and unusual expropriation of assets or an therefore are not extraordinary by per the IAS, but therefore are not items; earthquake or other natural expected to recur a change in the Act on forces of the items expected to recur the method nature, disaster. frequently or Accounting. included, as frequently or prior period regularly – of valuation “exceptional” do regularly - the items; Ordinary activities are those examples given of assets not support this examples given discontinuat which are undertaken as part are the and definition. are, e.g.: payments ion or of the enterprise’s business expropriation of liabilities received to suspension and such related activities in assets or an The “exceptional” • changes in cover losses shortages of a certain furtherance of, incidental to, earthquake or items are the from prior and damage type of or arising from those other natural separately valuation of years; activities. activity disclosed, but assets, disaster. surpluses in (including a together with profit from financial Nature and amount of Ordinary activities significant other non- • errors in the sale of accounts extraordinary items to be are those through change in recurrent items incomes fixed assets. and financial separately disclosed (total on and by which the production which are not and investments the face of the income enterprise enters methods or considered expenses EXTRAORDINAR or, if statement, analysis in the into relations with the sale of extraordinary as from the Y EXPENSES applicable, notes). other enterprises, an per IAS. previous surpluses in unusual as well as organized years, purchased items; auxiliary activities, part of the Analysis of these inventory • which contribute entity), and accounts the natural (but no prior period for the enterprise (“exceptional” disaster, surpluses of items; development. income and intangible compromis • discontinued Ordinary activity expenses) has to provisions and tangible e operations, can be subdivided be disclosed in for potential fixed assets) arrangemen etc. into operating, the notes. losses; t financial and adjustments proceeding Ordinary activities investing losses from of expenses s or are not defined. activities. previous or revenues corporate

22 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 8) Republic Macedonia

or revenues corporate years; of previous recovery Nature and accounting proceeding amount of loss from periods, if s. extraordinary the sale of significant items should be fixed assets. Definition of disclosed other ordinary activities separately (totals accounting not specified. in the income transactions statement, of an Nature and description in the extraordinar amount of notes). y nature extraordinary with regard items should be to the disclosed ordinary separately (total activities of on the face of the the income statement, enterprise, analysis in the in particular notes). the proceeds from transferring or closing the business or a part of the business of the accounting unit, etc.

Abnormal/ Items within profit or loss Not specified Not specified. No disclosure Comparable to Comparable to Comparable to Same Comparable to Not defined. Not specified, but Comparable to There is no There is a general Comparable to exceptional from ordinary activities of requirements IAS. IAS. IAS. (Supplementary IAS. so-called other IAS concept of rule: The notes to IAS. items such size, nature or incidence exist. Notes should operating income separate the financial that their disclosure is include all the and expenses are disclosure of statements should relevant to explain the figures to those shown separately. material figures in contain all facts performance for the period. contained in the the RAS. important to an

balance sheet and They include understanding of The nature and amount of the profit and loss proceeds and the current such items should be account, which NBV from sale of period’s financial separately disclosed (usually are necessary for fixed assets statements. in the notes). the true and fair (shown separately presentation of as income and

the entrepreneur's expense), particular financial donations, write- situation, and the offs of bad debts, results of its inventories and operations for the other assets and owners, investors liabilities. and creditors).

Correction Fundamental errors are of Comparable to Fundamental No regulatory Comparable to Not specifically Comparable to Comparable to Comparable to Not defined. Not specifically Comparable to The term Correction of According to SAS, of such significance that the IAS errors are of such rules in this area IAS. defined as a IAS (EASB, IAS; however the IAS. defined. Generally IAS “fundamental fundamental all fundamental fundament financial statements of one or significance that exist. separate category Income Statement determination of defined and dealt error” has no accounting errors accounting errors al more prior periods can no the financial of errors. Accounts – an error as with as ‘prior equivalent in the of prior periods, is are corrected as accounting longer be considered to have statements of one Fundamental fundamental is period items’. RAS. treated as an extraordinary errors been reliable at the date of or more prior Under Czech error, changes in based on financial adjustment to the expenses or accounting law The financial The amount of the their issue. periods can no accounting parameters; those The benchmark extraordinary revenues in the disclosure about impact of ‘prior corrections is longer be policies and being an error treatment is to be items. current period Benchmark treatment - treat significant items period items is included in the The benchmark considered to changes in greater that 1% of applied to material Comparative financial the correction of a are required, dealt with in the current period’s treatment is to be have been reliable accounting total assets or in items. information is not statements. fundamental accounting error applied to all at the date of their when they are estimates.) excess of 500 mil. current year profit results. restated. as an adjustment of the material items. issue. considered HUF. and loss account. Disclosure Although the RAS opening balance of retained important The benchmark requirements Disclosure in the Disclosure of allow for earnings and restate Benchmark (material) for the treatment is to be comparable to notes is required information about disclosure of comparative information. treatment - treat understanding of applied to material IAS. (amount, Disclosure significant events errors there is no the correction of a the financial items. description). Disclosures required: requirement not fundamental statements. related to The alternative requirement for specified. accounting error Disclosure previous periods treatment may be disclosure of the nature of the error; as an adjustment Correction of a requirements accounted for in applied to the nature, amount fundamental comparable to the current year and correction of effect in current and of the opening financial balance of accounting error IAS (EAL, financial statements fundamental error prior periods; retained earnings. must be included Appendix 3). statements as required by the effect on periods prior Restate in the current required. IAS. The alternative to those shown in comparative period’s results treatment may be For public comparative information; information but do and comparative applied to companies IAS and not amend the information immaterial benchmark approved financial presented as amounts. treatment is the the fact that statements. previously comparative information reported. only permitted has been restated or that it Disclosures treatment since

is impracticable to do so. required: 1999.

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 8) Republic Macedonia

Allowed alternative treatment the nature of Disclosures - the amount of the correction the error; required: may be included in the current period’s results and effect in specification Only the comparative information current and of alternative presented as previously prior corrections treatment under reported. periods; made; IAS is allowed - effect on the amount of the explanation prior periods correction must of their to those be included in the nature. shown in current period’s comparative results and information; comparative and information presented as the fact that previously comparative reported. information has been restated or that it is impracticabl e to do so.

The alternative treatment is not specified in NAS.

Changes in A change in accounting policy Requirement for A change in Adopted Comparable to A change in Comparable to The evaluation A change in Comparable to A change in A change in The term A change in (Preface to SAS, accounting should only be made if change in accounting policy accounting IAS. accounting policy IAS - if required principles applied accounting policy IAS. accounting policy accounting policy “accounting accounting policy number 6) A policy required by statute or by a accounting policy. should only be polices should be should be applied under an EASB in the preparation should only be should only be may be made policies” has no should only be change in an standard setting body or so No further made if required consistent during prospectively in guideline (EASB, of the balance made if required made so as to based on a equivalent in the made if required accounting policy as to give a more appropriate guidelines exist – by statute or by a reporting period. the current and Income Statement sheet for the by a standard give a more management RAS. by the changes in that has a presentation. comparable to standard setting A change in future periods. Accounts – previous year may setting body, appropriate decision approved the accounting material effect in IAS. body or so as to accounting policy Comparative Fundamental be changed only if Latvian laws and presentation. by the Board of Per RAS, a law or accounting the current period A change made on the basis give a more may be made information should error, changes in the factors regulations or so Directors. unilateral change regulations or so or may have a of a new IAS should be appropriate only: be presented as accounting causing the as to give a more No adjustment to of policy is not as to give a more material effect in accounted for in accordance presentation. previously policies and change prevail on appropriate the opening allowed without appropriate subsequent with the transitional if required reported. changes in a permanent presentation. balance of an accompanying presentation. periods should be provisions specified in the The change in by statute or retained earnings legal change. accounting basis, that is, for disclosed together standard. accounting policy by a rules estimates.) no less than a Benchmark and restatement The effect of the with the reasons. The bench mark The RAS does not is applied setting period of one treatment - other of comparative retrospective The effect of the Benchmark treatment - other treatment and allow prospectively. body; As of IAS (EAL year, and the changes should figures is required application of the change should, if changes should be applied disclosure amendments to §21.3 and EASB change be applied for companies accounting policy material, be retrospectively with an in the case requirements are be made guidelines). consequently retrospectively other than publicly may be included disclosed and adjustment to the opening of an entity’s comparable to regarding qualifies as with an traded in the current quantified. balance on retained earnings. reorganizati As of IAS (EAL, IAS. previous periods. permanent or adjustment to the companies. period’s results Comparative information on; Appendix 3). Any adjustments long-term. In this opening balance and comparative should be restated where on retained Disclosures: have to be made information in the case Alternative case the factors practicable. Disclosures: earnings and to Alternative in the current presented as of change of treatment is causing the the reasons the open treatment is period. previously Disclosures: ownership; allowed for change, and the for the change; • the reasons for information in allowed for reported. immaterial items. effect thereof As the concept of the change; financial immaterial items. • the reasons for the change; in the case expressed in effect on accounting statement’s The notes should • effect in current of necessity figures shall be financial result policies is not • effect in current and prior annex. disclose: and prior to optimize detailed in the of the year; applied in the periods; Comparative periods; the supplementary and RAS, the the reason accounting. appendix. information should • effect on periods prior to treatment does for the • effect on be restated where additional those shown in not meet this change, periods prior to The rules require No retrospective practicable. information comparative information; standard those shown in disclosure of the application is securing total effect. and Disclosure comparative reason for the allowed. comparability accounting policy requirement of prior period The IAS • the fact that comparative information; comparable to and change. figures. benchmark information has been IAS treatment is not

restated or that it is • For publicly allowed. Any the fact that impracticable to do so. traded companies changes are comparative an adjustment to applied only Allowed alternative treatment information has the appropriate prospectively and - the effect of the been restated equity balance no adjustments to retrospective application of or that it is with restatement the opening the accounting policy may be impracticable to of comparative balance on included in the current do so. Any changes are figures is retained earnings period’s results and Alternative not applied required. should be made. comparative information treatment is retrospectively Accordingly, no presented as previously allowed Additional and no restatement of reported. adjustments to the disclosures of the comparative opening balance effect of change A change in accounting policy information should on retained on financial should be applied be performed. earnings should position, prospectively when the be made. profitability and adjustment to opening

24 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 8) Republic Macedonia

adjustment to opening Accordingly no liquidity. retained earnings cannot be The following restatement of reasonably determined. does not comparative

constitute a information should change in be performed. accounting policy:

Adoption of accounting policy for transaction and events that significantly differ by nature from transactions and events accounted for in prior periods; and

Adoption of a new accounting policy for transactions and events which happen for the first time or are of no significant size.

Changes in The effect of a change in In case of The effect of a The effect of a Comparable to Comparable to Comparable to Not specified Comparable to Not defined. Not specified. Comparable to There is no The effect of a Comparable to accounting accounting estimate should changes in change in change in IAS. IAS. IAS (EASB, IAS. IAS. concept of change in IAS. estimates be included in the period of presentation of accounting accounting Income Statement accounting accounting change and, if affected, in annual accounts estimate should estimate should Accounts – estimates in RAS. estimate should future periods. and of estimation be included in the be included in the Fundamental be included in the methods used, period of change. period of change. error, changes in period of change The nature and amount of a these changes accounting and, if affected, in change in accounting should be detailed policies and future periods. estimate that has a material and explained in changes in

effect in the current period or the annex to the accounting According to a which is expected to have a financial estimates.) general rule: the material effect in subsequent statements notes to the periods should be disclosed. specifying their financial If it is impracticable to effects on equity statements should quantify the effect, that fact and financial contain all facts should be disclosed. results of the important to an enterprise. understanding of the current period’s financial statements.

Discontinu A discontinued operation Not specified Comparable to Not specified. Comparable to Not specified. Not specified. Not specified. Not specified. Not defined. No specific Such disclosure is There is no Profit and loss Comparable to ed results from the sale or IAS. IAS. definition of a not required by concept of items related to IAS. operations abandonment of an operation discontinued the AL. discontinued discontinued i.e. a separate, major line of operation. operations in the operations are business, of which the RAS. recorded together assets, results and activities Disclose for with those in the can be distinguished operations normal course of physically, operationally and discontinued in business. They for reporting purposes. the current period are then deducted or intended to be from operating Disclose for each discontinued in profit in a special discontinued operation: the following line of the P&L period: and presented in • nature of the operation; the extraordinary revenue; • industry and geographical section of the segments in which it is costs; and P&L. reported; profit or loss The notes should • effective date of of the disclose: operation. discontinuance; (amount, description).

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• manner of discontinuance;

• gain/loss on discontinuance and the policy used to measure that gain or loss; and • revenue and profit/loss on ordinary activities for the period, and corresponding amounts for each prior period presented.

For operations discontinued after the year-end, disclose as far as is practicable.

Note: IAS 35 Discontinuing Operations (periods commencing on or after January 1, 1999) defines the critical event for discontinuing operations as the initial disclosure event and specifies comprehensive disclosures for periods between the initial disclosure event and the date of completion of the discontinuance.

26 Comparison of International Accounting Standards and Lithuanian Accounting Policies

5. Events after the Balance Sheet Date Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 10) Republic Macedonia

Post Adjust for events: Comparable to Adjusting events No statutory Comparable to Comparable to Comparable to Comparable to Comparable to Not defined. In theory, post Not specified in The RAS does No definition of No SAS covers balance IAS are events requirements as IAS. IAS. IAS. IAS. IAS balance sheet the Law. not recognize this post balance this area, use sheet • that provide additional occurring after the to either period extends to concept. sheet evens, just IAS. events evidence of amounts relating balance sheet disclosure or The treatment of Profit can be the date when the examples, but to conditions existing at the date that provide adjustment for dividends that are divided only after financial Dividends the general rule

balance sheet date; or additional any material post proposed or financial statements are declared before exists: declared after the statement is approval of the • Not specified evidence of balance sheet approved by that indicate that the going amounts relating events which balance sheet approved but Shareholders financial Disclosure should concern assumption in to conditions exist. date, but before suggested that Meeting. statements are be made of relation to the whole or part existing at the approval of the the management adjusted for. events that are of of the enterprise is not balance sheet financial profit distribution Adjust for events such importance appropriate. date. statements are scheme is shown occurring after the that non- Not specified not specified in in the balance sheet disclosure would Disclosure should be made of Non-adjusting Czech law. management date, which might affect the ”true

other events that are of such events are events report. have a significant and fair view”. importance that non-disclosure occurring after impact on the would affect the ability of users the balance sheet financial Dividends which to make proper evaluations Comparable to date for which no statements before are disclosed in and decisions. IAS conditions existed they are the notes. at the balance approved. Dividends that are proposed or declared after the balance sheet date. Disclose sheet date, but before approval of the financial statements, For adjusting information about may be either adjusted for or events: significant post disclosed. balance sheet events not • account for recognized in the expenses/liabilit financial ies to be statements. incurred if a reliable estimate can be Not allowed to made; adjust for proposed • when dividends. expenses/liabilit ies cannot be estimated reliably do not adjust but disclose in the Notes to the financial statements

• expected income is not recognized but disclosed in the notes only when it is considered probable that it will be realized.

Events occurring between the date of the preparation of the financial statements and the date of their approval are not accounted for but are disclosed.

Disclosure Disclose: Comparable to Disclose: No statutory Comparable to Comparable to Comparable to Comparable to Comparable to Not defined. Disclosure of Not specified in Not specified. Disclose: No SAS covers of post IAS requirement IAS. IAS. IAS (EAL §33). IAS. IAS. information about the Law this area, use • the nature of the event; and balance For adjusting exists. significant post • the nature of IAS. sheet events: balance sheet the event; and • an estimate of the financial Development events costs are events not effect, or a statement that • the nature of • amortized using recognized in the the estimate of such an estimate cannot be the event; and the straight-line financial the financial made. statements. effect is not • an estimate of method over a period not required the financial No specific exceeding 5 years effect, and the disclosure (EAL § methods requirements. applied in arriving at this Comparable to estimate. IAS (EASB, Balance Sheet

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Comparable to For non-adjusting IAS (EAL events: Appendix 3). Accounts). 33). • the nature of the event;

• an estimate of the effect of the event on the assets, liabilities and the financial result of the company

• any uncertainty in arriving at the estimate.

Disclose information in relation to non- applicability of the “going concern” concept.

Disclose the accounting policy and the procedures undertaken for identification of events occurring between the date of the balance sheet and the date of the approval of the financial statements by the Management of the company.

28 Comparison of International Accounting Standards and Lithuanian Accounting Policies

6. Construction Contracts Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 11) Republic Macedonia

Definition of A construction contract is a Not specified. A construction A construction Comparable to Not specified. Comparable to IAS Hungarian Civil Not specified. Constructions in Not specified. Comparable to There is nothing in Comparable to IAS No SAS covers the contracts contract specifically contract is a contract is a IAS. (EASB, Revenue Code defines the progress and IAS. the RAS equivalent definition of negotiated for the contract specifically contract specifically Recognition under meaning of any prepayments to this IAS. construction construction of an asset or a negotiated for the negotiated for the the Revenue contract. include the value of contracts, use IAS. combination of assets that construction of an construction of an Principle). fixed assets are closely related or asset or a asset or a incomplete at year- interdependent in terms of combination of combination of end, as well as the their design, technology and assets that are one assets that are prepayments on function or their ultimate object. Activities closely related or contracts related to purpose or use (includes defined as interdependent in these fixed assets. contracts for the rendering of construction are terms of their Long-term assets services directly related to the construction of design, technology for resale acquired construction of the asset and buildings, dams, and function or by an enterprise contracts for the destruction tunnels, bridges, their ultimate are treated as or restoration of assets and ships and other purpose or use stocks and are restoration of the environment complex (includes contracts disclosed in the following the demolition of equipment. for the rendering of item “Goods for assets). services directly resale” or Special rules apply for Special rules apply related to the “Immovable segmenting and combining for segmenting and construction of the property intended contracts for the purposes of combining asset and for resale”. The the standard. contracts for the contracts for the value of a purposes of the destruction or construction in standard. restoration of progress or the assets and finished restoration of the construction for environment sale is also treated following the as stock and is demolition of disclosed assets). respectively in items: “Contracts in progress” or “Immovable property intended for resale”.

Basis for Where the outcome of a Not specified. Comparable to Construction costs Comparable to Work-in -progress Comparable to IAS There is no Not specified Not defined. Not directly Comparable to Not specified. Comparable to (SAS 18.19) As recognizing construction contract can be IAS. are recognized in IAS. is valued at costs (EASB, Revenue standard rule for addressed. IAS. IAS. per IAS. revenue estimated reliably, revenue the period in which without profit. Recognition). recognizing and costs and costs should be Detailed guidance they are incurred. revenue and cost. In practice: recognized by reference to is provided as to Revenues and Usually the the stage of completion of when the expenses Revenues are profit are contract contains • revenue contract activity. will be considered recognized at the recognized on the the terms of recognized as non- moment of completion of the payment and based on work If the outcome cannot be recoverable. completion and contract (or completion of the completed and estimated reliably, no profit acceptance of contract construction. invoiced; can be recognized. Instead, every contractually milestone). These to are • contract costs should be agreed stage of usually matched to costs matching expensed as incurred and construction. each other. revenue contract revenue recognized The amount of recognized only to the extent that revenues being The main rule (costs contract costs incurred are recognized is defined in HAS is applicable to expected to be recoverable. initially defined on that the recognized work completed Detailed guidance provided a budgetary basis revenues of the and invoiced). as to when the outcome can and is adjusted in performance in the be measured reliably. view of actual costs period concerned Before billing no according to a of the activities and revenue is method prescribed costs recognized and by construction (expenditures) costs are contract. corresponding to accumulated as such revenues work-in-progress. shall be taken into account, regardless of their financial settlement. The revenues and costs shall relate to the period in which they were economically incurred.

Foreseeabl If it is probable that total Not specified. Comparable to In case it is Comparable to Comparable to Comparable to IAS Comparable to Not specified. Not defined. Certain or probable Comparable to Not specified. Comparable to IAS No SAS covers this e losses contract costs will exceed IAS. probable that total IAS. IAS. (EAL §5). IAS. losses on IAS. area, use IAS. total contract revenue, the contract costs will economic activities expected loss should be exceed total in process should recognized immediately. contract revenue, be provided for if:

29 Comparison of International Accounting Standards and Lithuanian Accounting Policies

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the rules do not require recognition • information of the expected derived from an loss. appropriate source (document) or can be reliably justified;

• a reasonable estimate of the loss can be made.

Determinati May be determined in a Not specified. Comparable to Not applicable. Comparable to Not specified. Comparable to IAS Comparable to IAS Not specified. Not defined. Not applicable – Comparable to Not specified, but May be determined No SAS covers this on of stage variety of ways, including: IAS. IAS. (EASB, Revenue stage of IAS. the same in in a variety of area, use IAS. of Recognition). completion method practice. ways, including: completion • the proportion that is not used in contract costs incurred for practice. • the proportion work performed to date that contract bear to the estimated total costs incurred contract costs; for work performed to • surveys of work date bear to the performed; or estimated total • actual budgeted completion of a physical costs (this can proportion of the contract be misleading work. as there is not requirement to update budget and overruns might not be reflected);

• surveys of work performed; or

• Completion of a physical proportion of the contract work.

Disclosure Disclose: Not specified Comparable to Disclose: Comparable to Not specified. Comparable to IAS Comparable to IAS Not specified. Not defined. No specific Comparable to Not specified. Comparable to No SAS covers this IAS. IAS. (EAL, Appendix 3). disclosure IAS. IAS. area, use IAS. • contract revenue • contract requirements. recognized in the period; revenue recognized in • the methods used to the period; determine contract revenue; and • aggregate costs incurred and • the methods used to recognized determine the stage of profits (less completion of contracts. recognized losses) to date; For contracts in progress at the year end, disclose: • the amount of advances • aggregate costs incurred received; and recognized profits (less recognized losses) • gross amount to date; due from customers for • the amount of advances contract work received; and as an asset; and • the amount of retentions. Present: • gross amount • due to gross amount due from customers for customers for contract contract work as work as an asset; and a liability. • gross amount due to customers for contract work as a liability.

30 Comparison of International Accounting Standards and Lithuanian Accounting Policies

7. Income Taxes Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 12) Republic Macedonia

Recognition Record tax for the current and Comparable to Comparable to Comparable to Comparable to Comparable to Comparable to IAS Record tax for the Comparable to Recognition of Comparable to Comparable to Comparable to Comparable to No SAS covers – current prior periods as a liability to IAS. IAS. IAS. IAS. IAS. (EASB, Balance current and prior IAS. deferred tax assets IAS. IAS. IAS. IAS. this area, use IAS. tax the extent that it has not been Sheet Accounts). periods as a or liabilities is not Tax losses cannot The RAS does not settled, and as an asset to As it is not allowed liability to the allowed. Loss A tax loss cannot As it is not allowed be carried back in consider the the extent that the amounts to carry a tax loss extent that it has incurred in be carried back. to carry a tax loss Poland therefore concept of already paid exceed the back, no deferred not been settled, previous reporting back, no deferred no treatment recognizing tax amount due. tax asset can arise and as an asset to periods can be tax asset can arise specified. losses as an asset. therefrom. Not specified, as the extent that the carried forward to The benefit of a tax loss, therefrom. tax losses cannot amounts already offset current which can be carried back to be carried back in paid exceed the reporting period recover current tax of a prior Estonia. amount due. profit for five years. period, should be recognized

as an asset. As it is not allowed to carry a tax loss back, no deferred tax asset can arise therefrom

Measureme Liabilities (assets) to be Comparable to Liabilities (assets) Comparable to Comparable to Comparable to Comparable to IAS Comparable to Comparable to No recognition of It is not specified Comparable to IAS Comparable to Comparable to No SAS covers nt – current measured at the amount IAS. to be measured at IAS. IAS. IAS. (EASB, Balance IAS. IAS. deferred tax assets which rates should IAS. IAS. this area, use IAS. tax assets expected to be paid to the amount Sheet Accounts). or liabilities are be used for the and (recovered from) taxation expected to be allowed. measurement of liabilities authorities, using the paid to (recovered current tax rates/laws that have been from) taxation liabilities (assets). enacted or substantively authorities, using enacted by the balance sheet the rates that have In practice they are date. been enacted at measured using the date they the rates/laws that should have been have been enacted paid. or substantially enacted by the balance sheet date and are applicable for the period.

Recognition A deferred tax liability should Not specified A deferred tax According to the Comparable to Deferred tax A deferred tax There is no Comparable to No recognition of The ‘Act’ does not There is no There is no A deferred tax Not specified. - deferred be recognized for all taxable liability should be statutory rules IAS. liability is only liability is provided concept of deferred IAS. deferred tax specify whether concept of deferred concept of deferred liability should only (However, the tax temporary differences other recognized for deferred tax obligatory for for, if it is tax in HAS. liabilities is allowed. deferred tax tax in the AL tax assets and be recognized if Institute is liabilities than differences arising from: taxable timing liabilities are not entities which reasonably liability should be liabilities in the the company is contemplating the differences. accounted for. constitute a Group probable that this recognized for: RAS. part of a group of introduction of • which is not of entities. liability will require companies - on the deferred taxes in deductible for tax the entity to give up • all taxable taxable temporary Slovenia.) purposes; resources in a temporary differences, arising In this case it is the future accounting differences; or from the temporary • difference between the initial recognition of an period (EAL, differences tax expenses and • asset/liability other than in Appendix 3). the excess of between tax and accounting a business combination taxable accounting expenses due to which, at the time of the temporary depreciation. transaction, does not affect differences As Estonia is set differences over the accounting or the between tax and on a course of deductible taxable profit; and accounting doing away with temporary depreciation. corporate income differences. • undistributed profits from taxes, the investments where the recognition criteria In practice both entity is able to control the may not be methods are timing of the reversal of the satisfied. used. difference and it is probable that the reversal Temporary will not occur in the differences are foreseeable future. identified using an income statement

method (different moments of revenue and cost recognition for tax and accounting purposes).

Temporary differences, which arose prior to the implementation of the ‘Act’ (1995), are treated as permanent

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differences and not recognized.

Treatment of deferred tax in business combinations is not specified.

Recognition A deferred tax asset should Not specified A deferred tax According to the Comparable to As for deferred tax Comparable to There is no Not specified. No recognition of The ‘Act’ does not There is no There is no A deferred tax Not applicable. - deferred be recognized for all asset should be statutory rules IAS. liabilities. IAS. concept of deferred deferred tax assets specify whether concept of deferred concept of deferred asset should only tax asset deductible temporary recognized for deferred tax assets tax in HAS. is allowed. deferred tax asset tax in the tax assets and be recognized if

differences to the extent that deductible timing are not accounted However, as is recognized for: liabilities in the the company is it is probable that taxable differences, tax for. Estonia is set on a RAS. part of a group of • all deductible profit will be available against losses carried course of doing companies - on the temporary which the deductible timing forward and away with taxable temporary differences; or differences can be utilized, unutilized tax corporate income differences, arising unless the deferred tax asset credits. from the temporary taxes, the • excess of arises from: recognition criteria differences deductible between tax and No specific rules may not be • negative goodwill which is temporary accounting exist for the satisfied. treated as deferred income differences over depreciation. under IAS 22 Business recognition of a taxable Combinations; or deferred tax asset temporary in respect of differences to • the initial recognition of an negative goodwill the extent that it asset/liability other than in or tax assets is probable that a business combination arising from they can be which, at the time of the investments in utilized against transaction, does not affect subsidiaries, taxable profits the accounting or the associates, in the following taxable profit. branches and joint and future ventures. periods. Deferred tax assets for deductible timing differences Recognition of arising from investments in deferred tax asset subsidiaries, associates, is optional to the branches and joint ventures entity. should be recognized to the extent that it is probable that the temporary difference will reverse in the foreseeable future and that taxable profit will be available against which the temporary difference will be utilized.

Unused tax A deferred tax asset should Not specified Not specified. Not applicable. Comparable to Deferred tax is Comparable to There is no Not specified. No recognition of Unused tax losses There is no There is no No specified. Not applicable. losses and be recognized for the IAS. calculated as IAS. concept of deferred deferred tax assets are not treated as concept of deferred concept of deferred unused tax carryforward of unused tax difference between tax in HAS. is allowed temporary tax in the AL tax assets and credits losses and unused tax credits accounting and tax However as differences in view liabilities in the to the extent that it is depreciation only. Estonia is set on a of the definition RAS. probable that future taxable course of doing provided above profit will be available against away with and should not be which the unused tax losses corporate taxation, included in and unused tax credits can the recognition deferred tax be utilized. criteria may not be calculation. satisfied.

Unused tax credits are treated as amounts recoverable from tax authorities and presented as tax receivables.

Measureme Deferred tax assets and Not specified Deferred tax assets Not applicable. Comparable to Deferred tax assets Estonia is set on a There is no Not specified. No recognition of Not specified – in There is no There is no Deferred tax assets Not applicable. nt - deferred liabilities should be measured and liabilities are IAS. and liabilities are course of doing concept of deferred deferred tax assets practice deferred concept of deferred concept of deferred and liabilities tax assets at the tax rates that are measured at the calculated as the away with tax in HAS. or liabilities are tax liabilities/assets tax in the AL tax assets and should be and expected to apply to the tax rates that were difference between corporate taxation. allowed. measured using liabilities in the measured at the liabilities period when the asset is applied to the tax and accounting If the draft law is tax rates that are RAS. tax rate applicable realized or the liability is period when they depreciation passed in expected to apply for the next settled (liability method), occur. multiplied by tax Parliament before when the accounting and tax based on tax rates/laws that rate for the 31st December temporary period (In Slovakia

have been enacted or following 1999 the tax rate differences will they are the same In subsequent substantively enacted by the accounting period, expected to apply reverse (the asset – calendar year) periods when the balance sheet date. stated in Act on in the future is 0%. is realized or tax rate is Income Tax. At present, the liability is settled) The measurement should changed, the based on the tax corporate tax rate No recoverability is reflect the entity’s remaining balance rates/laws that is 26%. specifically expectations at the balance (asset or liability) is have been enacted

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expectations, at the balance (asset or liability) is have been enacted mentioned – only sheet date, as to the manner adjusted by or substantively the general in which the carrying amount applying the new enacted by the prudence concept of its assets and liabilities will rate. balance sheet should be applied. be recovered or settled. date.

Deferred tax assets and liabilities should not be Discounting is not discounted. mentioned in the Slovak regulation. The carrying amount of deferred tax assets should be reviewed at each balance

sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized. Any such reduction should be reversed to the extent that it becomes probable that sufficient taxable profit would be available.

Effect of Not specifically addressed in Not specified. Not specified. Not applicable. Comparable to Not specified. Not specified. Not specified. Not specified. Not defined. Revaluation gains Not specified. Not specified. Revaluation is not Not applicable. revaluation IAS 12 (Revised 1996) - IAS. or losses (only allowed. of assets general rules will require revaluation provision for tax required by law is consequences to be made permitted) are not and offset against the treated as revaluation reserve. temporary differences under the income statement method.

Undistribut Provision should be made for Not specified. Not specified. Not applicable. Comparable to Not specified. Equity method Not specified Not specified No recognition of Not specified. Not specified. Not specified. Not allowed, as Not applicable. ed earnings taxable temporary differences IAS. gains / losses do deferred tax assets deferred tax is of unless the investor is able to not affect taxable or liabilities are applicable only to subsidiarie control the timing of the income in allowed. differences s and reversal of the difference and accordance with between associates it is probable that it will not effective legislation. accounting and tax reverse in the foreseeable depreciation – as future. specifically mentioned in the regulations.

Offset Current tax assets and Not specified. Current tax assets Current tax assets Comparable to Comparable to Comparable to IAS Not specified Comparable to No recognition of Optional to the There is no Not specified. Offset of the Offset is not current tax liabilities should and current tax and current tax IAS. IAS. (EAL §25). IAS. deferred tax assets company: concept of deferred current tax assets permitted. be offset if, and only if, the liabilities should liabilities should or liabilities are tax in the AL and current tax entity has a legal right of be offset if, and be offset if, and allowed. • if deferred tax liabilities is not

set-off and it intends either only if, the entity only if, the entity liability/asset allowed except for recognized for to settle on a net basis, or to has a legal right of has a legal right of additional tax and realize the asset and settle set-off and it set-off and it the difference tax returns of the the liability simultaneously. intends either to intends either to between corporate tax and settle on a net settle on a net Deferred tax temporary indirect taxes Deferred tax assets and basis, or to realize basis, or to realize assets should be taxable and identified for prior deferred tax liabilities should the asset and the asset and offset to extent that deductible periods. be offset if, and only if, the settle the liability settle the liability the net amount has differences – entity: simultaneously. simultaneously. a credit balance. automatic Not specifically When the net offset; addressed with • has a legal right to set-off amount has a debit respect to current tax assets against • balance, the if deferred tax deferred taxes. current tax liabilities; and deferred tax asset liability and deferred tax • is not recognized. the deferred tax assets asset and the deferred tax recognized liabilities relate to income separately – taxes levied by the same either separate taxation authority on presentation or either the same taxable offset. entity or different taxable entities which intend to settle on a net basis In practice during the period of separate settlement/recovery of the presentation of deferred tax differences. deferred tax assets and liabilities is rare.

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 12) Republic Macedonia

Current tax assets Current tax Financial Current and deferred tax Not specified. Current and Comparable to Current and Comparable to IAS Tax liability or Comparable to No recognition of Current and There is no Current and and liabilities are Not applicable presentation is statement should be recognized as deferred tax should charged to profit IAS. deferred tax always asset has to be IAS. deferred tax assets deferred tax should concept of deferred deferred tax should much like that presentatio income or an expense and be recognized as and loss recognized as presented as Other or liabilities are be recognized as tax in the AL be recognized as described in IAS n included in net profit or loss income or as an income or an Liabilities or Other allowed. income or an income or an 12: a) tax

for the period, except to the expense and Tax assets and expense and Assets. expense and expense and receivables and extent that the tax arises included in net liabilities should be included in income included in net included in net liabilities should be Tax assets and tax from: profit or loss for the presented statement. profit or loss for the profit or loss for the presented liabilities are period. separately from period. period. separately; b) • a transaction or event Tax assets and presented as other assets and current tax should which is recognized directly liabilities are Presentation of tax current liabilities in the No specific rules Tax assets and be recognized and in equity; or presented on transactions assets/liabilities in balance sheet. regarding taxes liabilities should be included in net separately on the recognized directly the primary • arising from a presented profit or loss for the a business combination balance sheet on equity is not business financial separately from year. that is an acquisition. within current specified. combination. statements. Within other assets and assets or current the notes those tax liabilities in the If the tax relates to items that liabilities. assets / liabilities are credited or charged Current tax assets balance sheet. and liabilities are specifically directly to equity, the tax (including both disclosed. The deferred tax should also be charged or income taxes and assets and credited directly to equity. other tax and social liabilities are

If the tax arises from a security items) always classified should be as current assets business combination that is an acquisition, it should be presented Deferred taxation is and liabilities (this separately from not recognized. comes from the recognized as an identifiable asset or liability at the date of other assets and prescribed balance

acquisition in accordance with liabilities either on sheet). IAS 22 Business Tax assets and the face of the

Combinations (thus affecting liabilities should balance sheet or in No other goodwill or negative be presented the notes. regulations.

goodwill). separately on the Deferred tax face of the Tax assets and liabilities balance sheet. liabilities should be should be presented presented separately from other assets Disclose separately separately either and liabilities in the balance on the face of the on the face of the sheet. balance sheet balance sheet or in deferred tax assets the notes under the Deferred tax assets and and deferred tax ‘provisions’ liabilities should be liabilities. heading. distinguished from current tax Deferred tax assets assets and liabilities. should be When an enterprise makes a presented under distinction between current the ‘deferred and non-current assets and expenses’ heading. liabilities in its financial statements, it should not classify deferred tax assets and liabilities as current assets and liabilities.

Disclosure The tax expense/income Comparable to Tax assets and The tax expense Comparable to Income tax from Disclose In the All explanations No recognition of The tax Disclose calculated The RAS discloses The tax • Disclose the tax s - general relating to profit or loss from IAS liabilities should relating to profit or IAS. extraordinary calculated and supplementary are outside of the deferred tax assets expense/income and paid income the tax expense, expense/income expense/incom ordinary activities should be be disclosed loss from ordinary activities paid income tax notes the company financial or liabilities are relating to profit or tax amounts, but it appears relating to profit or e relating to presented on the face of the separately on the activities should disclosed amounts, income has to present the statements as allowed. loss for the period income taxes below “exceptional” loss from ordinary profit or loss income statement. face of the be presented on separately on the taxes calculated differences disclosures of (including calculated from items and it is not and extraordinary from ordinary balance sheet. the face of the income statement. from extraordinary between the profit income tax extraordinary extraordinary related specifically activities should activities The major components of Not specified. income statement. Tax paid transactions (EAL, (loss) before tax declarations. items) should be transactions. to ordinary be presented in comparable to tax expense/income should disclosed in cash Appendix 3). and the tax base. presented on the activities. the income IAS. be disclosed. The major flow. face of the income statement.

components of tax statement. • Disclose he An explanation should be The RAS does not Not specified. expense should major provided of the relationship require these be disclosed. Disclose: components of between the tax expense/ detailed tax income and the accounting • disclosures as for a numerical expense/incom profit in either or both of the reconciliation IAS. e comparable to following forms: between IAS. accounting • a numerical reconciliation profit or loss • Explanation between the tax before tax and only of the expense/income and the taxable basis; relationship product of accounting between the tax

profit multiplied by the • tax expense/ applicable tax rate, expense/incom income and the disclosing also the basis e relating to accounting on which the applicable extraordinary profit required. tax rate is computed; or items recognized • Disclosure of • a numerical reconciliation during the aggregate between the average Not specified. period; current tax effective tax rate and the relating to items

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 12) Republic Macedonia

applicable tax rate, relating to items disclosing also the basis • amount of that are on which the applicable future income charged or tax liabilities. tax rate is computed. credited to equity is not Disclose: Additional applicable. disclosures for • the aggregate current tax publicly traded • Disclosure of relating to items that are companies: tax charged or credited to expense/incom equity; • reconciliation of e relating to the tax extraordinary • tax expense/income expense/incom items relating to extraordinary e in the profit recognized items recognized during and loss during the the period; account and the period is not product of • an explanation of applicable. taxable basis changes in the applicable multiplied by the • Disclose tax rate compared to the applicable tax explanation of previous accounting rate and changes in the period; and especially: applicable tax • in respect of discontinued - amount of rate compared investment to the previous operations, the tax expense/income relating relief and accounting to the gain/loss on investment period discontinuance and to the premium; comparable to result of the discontinued - amount of IAS. operation for both the donations • Disclosure of current and prior periods. deducted from taxable the tax income; expense/incom - reasons and e relating to the If IAS 12 (Revised) Income amount of gain/loss on Taxes is applied for financial tax discontinuance statements covering periods exemptions, and to the result beginning before January 1, relinquishme of the 1998, that fact should be nts or discontinued disclosed. reductions. operation is not applicable.

Disclosure Disclose: Not specified Tax assets and Not specified. Comparable to Disclose the nature Disclose the nature There is no Comparable to No recognition of No specific There is no There is no • The amount of Not applicable. s – liabilities should IAS. and amount of the and amount of the concept of deferred IAS. deferred tax assets disclosure concept of deferred concept of deferred deferred tax • deferred the aggregate deferred be disclosed deferred tax. deferred tax (EAL, tax in HAS. or liabilities are requirements in the tax in the AL tax assets and assets and tax tax relating to items that separately on the Appendix 3). allowed. ‘Accounting Act’. liabilities in the liabilities are charged or credited to face of the RAS recognized in equity; balance sheet. Disclosures for the balance publicly traded sheet for each • the amount (and expiry companies: period date, if any) of deductible temporary differences, • reconciliation of • The amount of unused tax losses and the balance of deferred tax unused tax credits for deferred tax income/expens which no deferred tax assets and e is presented asset is recognized in the deferred tax on the face of balance sheet; liability at the the P&L. • beginning and the aggregate amount of end of the temporary differences period; associated with investments in • the amount of subsidiaries, branches deferred tax and associates, and liability at the interests in joint ventures, end of the for which deferred tax period and its liabilities are not major recognized; components • (taxable the amount of the temporary deferred tax assets and differences) liabilities recognized in with applicable the balance sheet for tax rates; each period presented in respect of each type of • the amount of temporary difference, and deferred tax in respect of each type of asset at the end unused tax losses and of the period unused tax credits; and and its major • components the amount of deferred (deductible tax income or expense temporary recognized in the income differences); tt ti t f

35 Comparison of International Accounting Standards and Lithuanian Accounting Policies

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statement in respect of each type of temporary • effect on tax difference, and in respect expense/income of each type of unused of changes in tax loss and unused tax tax rates; credit, where not readily • apparent from the the amount of changes in the amounts deferred tax recognized in the balance asset write off sheet. due to probable non- When the utilization of a recoverability of deferred tax asset is the asset. dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable timing differences, and the enterprise has suffered a loss in either the current or the preceding period in the tax jurisdiction to which the deferred tax asset relates, the amount of such asset and the nature of the evidence supporting its recognition, should be disclosed.

36 Comparison of International Accounting Standards and Lithuanian Accounting Policies

8. Segment Reporting Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 14) Republic Macedonia

Enterprises Enterprises whose securities Not specified. No statutory rules Statutory rules do Comparable to The required Disclosure by There are no Only applies to Not defined. Certain minimal No segment There is nothing in All enterprises. No segment required to are publicly traded and other exist in this area. not require any IAS. disclosures of business activity, segmental large enterprises. segmental reporting is the RAS reporting is disclose economically significant specific segment markets and reporting information required equivalent to this required. segmental entities, including subsidiaries. disclosure of information listed geographic region requirements disclosures IAS. information segmental below apply for all is required (EAL under HAS. required for all IAS 14 (Revised), which is information. companies, which Appendix 3). companies

effective for accounting periods issue financial preparing commencing on or after July 1, statements under financial

1998, does not specifically Czech accounting statements under refer to ‘other economically legislation. the regulations of significant entities’, but will the ‘Accounting apply to enterprises in the Act’. process of issuing securities to the public. In addition, any enterprise voluntarily providing segmental information should comply with the revised IAS.

In general, the requirements of the revised standard are more detailed.

Analysis of The different industries and Not specified No statutory rules Not applicable. Comparable to Classification of Comparable to N/A Comparable to Not defined. Limited segment No segment There is nothing in The different Not applicable. financial geographical areas in which exist in this area. IAS. main activities IAS. IAS. information reporting is the RAS industries and information the entity operates. The required but not (comprising solely required equivalent to this geographical required activities of each reported specified in detail. disclosure of IAS. areas in which the industry and the composition of turnover) by entity operates. each reported geographical classes of The activities of

area should be described. business (types of each reported activity) and industry and the Under IAS 14 (Revised), either geographical composition of industry or geographical areas (domestic, each reported segmentation should usually be export sales) geographical area specified as primary (and the should be should be other as secondary), according disclosed. described. to which predominantly affects an enterprise’s risks and returns. Detailed guidance is provided for the identification of reportable segments - generally on the basis of the enterprise’s internal organizational and management structure and its system of internal reporting to the board of directors and the chief executive officer.

Information For each industry and Not specified No statutory rules Not applicable. Comparable to Only information Comparable to N/A Comparable to Not defined. For sales of No segment There is nothing in For each industry Not applicable. reported geographical segment, exist in this area. IAS. about sales from IAS. IAS. products and reporting is the RAS and geographical disclose: geographical goods for resale required equivalent to this segment, disclose segments disclosure of IAS. sales. • sales and other operating (domestic versus turnover by class revenues (segregate inter- export) is of business and No other segment); required. geographical area regulation. required. • segment result;

• segment assets employed either as monetary amounts or as a proportion of the total; and

• the basis of inter-segment pricing.

Reconciliation required between the sum of the information on individual segments and the aggregated information in the financial statements.

IAS 14 (Revised) specifies more extensive disclosure requirements - according to whether the segment has been identified as primary or

37 Comparison of International Accounting Standards and Lithuanian Accounting Policies

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secondary.

Changes in Changes in the identification of Not specified No statutory rules Not applicable. Comparable to Not specified. Comparable to N/A Not specified. Not defined. Not specified. No segment There is nothing in Not specific Not applicable. reported segments and in accounting exist in this area. IAS. IAS. reporting is the RAS guidance. information practices used to report required equivalent to this segment information should be IAS. disclosed - including details of the change, the reason for it

and, where practicable, the financial effect.

IAS 14 (Revised) requires prior information to be restated where there has been a change in the identification of segments. If this is not practicable, segment data should be reported for both the old and new bases of segmentation in the year of change.

38 Comparison of International Accounting Standards and Lithuanian Accounting Policies

9. Property, Plant and Equipment Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 16) Republic Macedonia

Impairment is not Scope of IAS 16 prescribes the rules Comparable to NAS 4 prescribes Belarussian Comparable to Comparable to Comparable to HAS prescribes LR FM letter Nr Not defined. Not specified. Property, plant & RAL art. 46-60 specifically (SAS 1) As per Standards for recognition, IAS. the rules for accounting IAS. IAS, Czech IAS. the rules for 02 – 5/357 as of equipment is covered by the IAS. measurement, depreciation recognition, regulations Accounting recognition, 30.5.94 recorded at cost regulations. Depreciation is set and other impairments of measurement, prescribe the Procedures for measurement, upon acquisition. (EAL §19-32 and Rule W339 on forth in SAS 13, property, plant and depreciation and rules for businessmen. depreciation and Throughout the EASB, Balance enterprise consistent with equipment. other impairments recognition, other impairments Company’s history, Sheet Accounts.) accounting. IAS. of property, plant measurement, of property, plant such Property, IAS 4 contains generalized and equipment. depreciation and and equipment. plant & equipment rules on depreciation, which other impairments is restated by LT investments are are consistent with those set NAS 4 and of property, plant HAS contains applying to its dealt with under out below in relation to Accounting Law and equipment. specific rules and SAS 3. property, plant and define the rules related to the accumulated equipment. on depreciation in depreciation, the The Government depreciation of relation to change in the Investment properties are of the Republic of property, plant property, plant general price index dealt with under IAS 25. Belarus sets and equipment. and equipment. from the date of annual Hungarian acquisition to the Note: IAS 36 Impairment of Investment depreciation rates companies often balance sheet Assets, effective for periods properties are in the document adopt the tax date. commencing on or after dealt with under “Standard rules for January 1, 1999 will depreciation. NAS 25. depreciation rates Such restatement supersede the provisions of for fixed assets in is not in IAS 16 dealing with Belarus” on accordance with impairments. 01/01/1991. IAS which requires that property, plant & equipment be carried at cost less accumulated depreciation or at appraised value, being the fair value at the date of appraisal.

Recognitio An asset should be Comparable to An asset should be An asset (property, Comparable to Fixed assets Comparable to IAS Comparable to Comparable to Comparable to Not specified. Comparable to There is no The same (SAS 1.21) As n of asset recognized when: IAS. recognized when: plant and IAS. should be (EAL §27). IAS. IAS. IAS. IAS. equivalent concept approach per IAS. equipment) should recognized when of asset applicable. • it is probable that future • it is probable be recognized the accounting unit recognition in the economic benefits that future when: has the ownership RAS. associated with the asset economic right (title) or the will flow to the enterprise; benefits • It is held by an right of and associated with enterprise for management to the asset will use in the the property. • the cost of the asset can be flow to the production or measured reliably. enterprise; supply of goods There is a limit for or services, for the recognition of

• the cost of the rental to others, fixed assets in CZK asset can be or for 40 000 for tangible measured administrative and 60 000 CZK reliably; purposes and is for intangible (Income Tax Law). • expected to be the asset has used during Assets which are been acquired more than one valued less than for the purpose year. CZK 40 000 of the production (tangible) or less activity, rent, • Capital than CZK 60 000 administrative expenditure was (intangible) and the and other made to develop economic lifetime specific needs or maintain the is longer than 1 (environmental activities or year, are classified etc.); assets covered as low-value • in (a) including assets. it is expected to leasehold be used for improvements. more than one reporting period; Exception: An and asset which value does not exceed a • its acquisition definite amount set cost exceeds up by Ministry of 150 Lev (new). Finance is recognized as a low value item.

Initial Initially recorded at cost. Comparable to Comparable to Initially recorded at Comparable to Where the asset is Comparable to IAS Comparable to Comparable to Initially recorded at Initially recorded at Comparable to Initially recognized Initially recorded at Same as IAS. Measureme IAS. IAS. cost. IAS. acquired in (EAL §29). IAS. IAS. cost. cost (an acquisition IAS. at cost with the cost. nt Where the asset is acquired in exchange for price or asset following exchange for another asset, The cost includes another asset, the Non-monetary production cost). Non – monetary amendments: per Recorded at (SAS 1.5) When the cost will be recorded as: Where the asset is any directly old one should be exchange is not exchange is not RAS the cost replacement cost the item is

39 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 16) Republic Macedonia

acquired in attributable costs disposed of, and specifically If received for no specifically recognition criteria where the asset is the item is • in the case of a dissimilar exchange for of bringing the the resulting gain Comparable to IAS addressed in HAS. consideration addressed.. is not always met acquired as: acquired in asset, the fair value of the another asset, the asset to working or loss recorded. (EASB, Cost (particularly in the as assets are exchange for a asset acquired which will be cost will be condition for its The acquired principle). form of a free gift) capitalized before • a gift similar asset which the fair value of the asset recorded at the intended use: assets are – the value should future benefits has a similar use in • given up; and carrying value of recorded at be determined on could be expected at no cost (free the same line of the asset given up. • development acquisition costs, the basis of the with reasonable of charge) business and • in the case of an asset and construction replacement costs, selling price of the certainty. Also, a • recently which has a similar which has a similar use in In case the costs; purchase price or same or a similar minimum fair value, the cost the same line of business, discovered and transaction is • own costs incurred item. recognition level is not previously of the asset at the carrying value of the effected through transportation (when produced or given. The acquired should be asset given up (no gain or costs, setting up recorded in the third parties, the developed No specific appropriate accounting measured at the loss recognized on the cost will be the fair and internally by the regulations materiality level for net carrying transaction). The fair value implementation. records. value of the asset accounting unit) regarding a company amount of the of the asset acquired may given up. exchange of capitalizing its fixed asset given up, provide evidence of a Relevant There is no borrowing costs assets. assets will regulation if the adjusted for any permanent diminution in generally be balancing payment are capitalized asset is acquired in value of the asset given up, No discounting of different from that or receipt of cash for which provision should during the entire exchange for term of the deferred imposed by law. another. or other be made. consideration consideration. borrowing.

All spare parts are There is no treated as regulation if the inventory under asset is acquired in Polish rules. exchange for another asset.

Subsequen Added to the carrying value of Comparable to Added to the Subsequent Comparable to Comparable to Comparable to IAS HAS: Added to the Comparable to Comparable to Added to the Comparable to In RAS no Added to the (SAS 1.6) t the asset where it is probable IAS. carrying value of expenditure on IAS. IAS. (EAL §29). gross value of the IAS. IAS. carrying value of IAS. equivalent. carrying value of Subsequent expenditure that the future economic the asset where it property plant and asset (if it is not yet the asset if it the asset where it expenditure related on asset benefits have been increased is probable that: equipment is only written off) where it increases the use is probable that the to a tangible fixed beyond those originally recognized as an is probable that the value of the asset future economic asset represent assessed - otherwise • the useful life will asset when the future economic measured by the benefits have been improvements that expense. be prolonged; expenditure benefits have been length of its useful increased beyond ought to be added • improves the increased beyond life, productivity, those originally to the gross the production condition of the those originally quality of products, assessed - carrying amount, capacity will be asset beyond its assessed – reduction of otherwise provided they increased; originally assessed otherwise operational expensed. increase the future • a higher quality standard of expensed expenses or other benefits from the of the products performance. measures. existing assets will be achieved; These instances beyond their may be: previously • assessed standard the functional • designation of modification of of performance; in the asset will be an item of plant this context the changed; and to extend its expenditures useful life, related to an • production costs including an extension of the will be reduced. increase in its assets’ estimated capacity; useful life Otherwise • represent a subsequent upgrading reduction of the expenditure on the machine parts to previous asset is recognized achieve a accumulated as expense. substantial depreciation made improvement in to the value of the

the quality of assets. output;

• adoption of new production processes enabling a substantial reduction in previously assessed operating costs.

Depreciatio For all depreciable assets: Comparable to Comparable to For all Comparable to Comparable to Comparable to Comparable to Comparable to Comparable to For all depreciable Comparable to The depreciable For all depreciable Same as IAS, and n IAS. IAS. depreciable IAS. IAS, the IAS (EAL §30). IAS.. IAS. IAS. assets (except for IAS. amount is allocated assets: additionally • allocate the depreciable assets, allocate depreciation land not used for over the asset’s disclose and amount over the asset’s the depreciable method should be extraction of useful life that is • allocate the quantify the effect useful life; amount over the consistent, total minerals, works of established by depreciable of the change in amount over • asset’s useful life depreciation is art and museum government depreciation total depreciation must be through charging charged to exhibits): decision. the asset’s method used. Also charged to the income the annual income statement. useful life; justify the change statement, unless it is • allocate the Per the RAS, there expense to • in the depreciation capitalized as part of income statement depreciable can be a move total method

40 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 16) Republic Macedonia

another asset; income statement depreciable from straight line to depreciation method. on monthly basis. amount over accelerated must be • where the estimate of the the asset’s depreciation, but charged to the

asset’s useful life changes, In specific limited expected useful there are no income adjust depreciation charge conditions life; specific statement, for the current and future enterprises are requirements for unless it is periods; and allowed to use • where the such a change. capitalized as accelerated estimate of the • part of another where depreciation method method of asset’s useful asset; changes, due to a change depreciation, life changes, in the expected pattern of which implies adjust • where the benefits, adjust the charge application of depreciation estimate of the for the current and future rates that should charges for the asset’s useful periods. not be two times current and life changes, higher than the future periods; adjust

statutory rates for depreciation the categories of • assets of low charge for the assets under unit value can current and consideration. be depreciated future periods; in a simplified and Where way through depreciation summary • where method changes, charges for depreciation due to a change in groups of similar method the expected assets or changes, due to pattern of benefits, through a one- a change in the adjust the charge off charge. expected for the current and pattern of future periods. benefits, adjust the charge for the current and future periods.

Subsequen Benchmark treatment - Comparable to Revaluation of Benchmark Comparable to Comparable to Comparable to IAS Comparable to Comparable to Long-term tangible Record at cost or Property, plant & Fixed assets are Benchmark Not applicable. t continue to record at cost less IAS. fixed assets, treatment - IAS. IAS. (EASB, Balance IAS. IAS. assets, which revalued amount equipment is carried at cost treatment – Remeasure accumulated depreciation. except land and continue to record Sheet Accounts). market value, less accumulated recorded at cost less accumulated continue to record Same as IAS – ment forests, is carried at cost less The alternative Recorded at fair exceed purchase depreciation. upon acquisition. depreciation. at cost less record at fair value Allowed alternative out at year-end accumulated treatment, Allowed alternative value at the date of and production Throughout the Revaluation of accumulated except in an The alternative treatment - record at fair with defined depreciation. revaluation, is not treatment may not valuation. No costs of the said Only periodical Company’s history, fixed assets is depreciation. inflationary treatment is not value at the date of valuation percentage not allowed under be applied. depreciation on the assets may be re- revaluations such Property, decided by economy the specified. less subsequent depreciation. exceeding the In view of the fact Czech GAAP as difference, but the valued provided imposed by legal plant & equipment government and carrying amounts

change of that since early fixed assets are revaluation must such an increase in regulations are is restated by can be mandatory Revaluation is not of costs of Revaluations are to be carried production prices 1990’s the valued at be performed on value is permitted. applying to its or optional. allowed except for: purchase and out regularly, so that the published by the Belarussian historical cost. regular basis substantiated and historical cost and adjustments for carrying value does not differ Both gross value Permanent National Institute of economy suffers (yearly) have long duration. accumulated Per RAS, depreciation materially from the fair value. and accumulated diminution in a Statistics hyperinflation, If such assets are depreciation, the revaluations are relevant to tangible property, plant and Revaluated items depreciation are subject to case of damage. fixed assets should Where an item is revalued, (Accounting Law). necessary to the change in the equipment of determined by the subject to Government be revalued at the the entire class of assets to enterprise to carry general price index A temporary Land and forests Belarussian company. revaluation (using Orders when all end of each period which that asset belongs out business, they from the date of decline in the value are valued at fair enterprises imposed fixed assets are to the new level of should be revalued. may be re-valued acquisition to the is accounted for at market value. undergo annual revaluation normally revalued prices. A up to the limit of balance sheet the Balance Sheet statutory indexes). at the one time. consumer price the sum that can date. date through a revaluations which index is applied to be justified by the provision (under is carried out on No alternative revalue tangible profitability. the principle of the balances as of treatment allowed. fixed assets, but conservatism). January, 1 by Depreciation, in the revalued

means of applying every year If the book value is purchase price indexes assigned subsequent to the should not on higher than fair for each category year on which the value at the average and over of asset by the revaluation took Balance Sheet a longer-term Government. The place, shall be date, this should period be higher last statutory estimated based be disclosed in the than the purchase revaluation was on the newly re- notes. prices and/or cost performed in 1997. valued value of the of construction or long-term assets manufacture of Allowed alternative and reflected in the identical or similar treatment – record items of the Profit classes of new at fair value at the and Loss account. tangible fixed date of valuation assets, if the less subsequent principle of the depreciation. lower of two values is to be observed. The valuation Under no should be done by circumstances an independent should revaluation licensed valuator of tangible fixed or internally on the assets result in basis of market their carrying prices confirmed amount being by greater than the manufacturer/deal recoverable er statement/price- amount of assets list. of this class See

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of this class. See The rules do not also discussion prescribe that the regarding inflation revaluations should in SAS in the be carried out foreword. regularly, so that the carrying value would not differ materially from the fair value.

Revaluation of an item does not mean that the entire class of assets to which that item belongs should be revalued.

Treatment Where a revaluation gives rise Not specified Comparable to IAS The statutory Comparable to Not applicable. Not specified. HAS: revaluation Comparable to The sum by which Increase in net Comparable to At the last An increase in the For SAS, any of to a value uplift, it should be (Accounting Law). revaluations imply IAS. gain has to be IAS. value of long-term value of fixed IAS revaluation (June value of property, increase in value of revaluation credited to the revaluation the value uplift and recorded on assets has been assets resulting 30, 1999) the plant and an asset due to a movement surplus (equity) unless it should be credited separate balance increased as the from revaluation revaluation equipment is not formal appraisal or

represents the reversal of a to the revaluation sheet line; result of their (statutory amount was accounted for valuation is

revaluation decrease of the surplus (equity). revaluation revaluation shall be revaluation only) credited to unless prescribed recorded as same asset previously differential debited reflected without should be credited revaluation by this or by any increasing the recognized as an expense, in among assets, making any impact to the revaluation surplus. The other special value of the asset Results of which case it should be revaluation surplus on the current reserve (equity), previous legislation. (only where all revaluations recognized as income. credited to equity. period result but in which is non- revaluation results conditions are met performed by the revaluation distributable. The treatment of a (December 31, for such an independent A decrease arising, A decrease arising as a result The revalued reserve account decrease is 1994) went increase, such as valuators should as a result of a of a revaluation should be assets have to be under specified directly to share reversal of be as an income or No downward revaluation should recognized as an expense in revalued each shareholders’ capital rather than previous decrease) expense in the revaluation. Any be recognized as so far as it exceeds the subsequent year; equity. to a revaluation and recording profit and loss decrease should an expense, i.e. amount that can be charged the revaluation surplus. extraordinary accounts. be treated as depreciation to the revaluation surplus (i.e. difference arising is revenue. the amount held in the recorded as impairment as The RAS does not charges in a case revaluation surplus relating to described above. described below. address the of permanent the same asset). situation where diminution and Any decreases No revaluation the revaluation addition to should be charged decrease can be produces a lower provision in a case to the income recorded over the valuation. of temporary statement in the existing revaluation decline. period in which surplus; in this The RAS has no they are case extra equivalent rules determined. amortization must for recognizing be charged. decreases in the . carrying value of the assets following a revaluation.

Impairment When the recoverable Not specified Not specified. No statutory Comparable to A permanent Comparable to IAS Comparable to Not specified. Not defined. Recognize in case Not specified The RAS does not Recoverable Same as IAS. amount has declined below accounting rules IAS. reduction in the (EAL §31, EASB, IAS. of change of consider the amount is not the carrying amount, the regarding value of fixed Balance Sheet production concept of specifically carrying amount should be impairment of the assets is Accounts). Revaluation technology, recoverable mentioned, but a (SAS 1.11, 1.12)

reduced to the recoverable assets exist. accounted through surplus can not be intention of no amount. temporary The write-down amount. the accumulated depreciated or further usage or decrease in value should be

depreciation decreased. other When there is is mentioned, in recognized as a

The write-down should be accounts; in this circumstances impairment in the which case a depreciation No provision in recognized as an expense in case the indicating value of fixed provision needs to expense of the HAS regarding so far as it exceeds the depreciation policy impairment. assets a provision be made. period. writing back. amount held in the revaluation should be revised. is made or the No SAS covers surplus relating to the same Charge to profit provision already writing back, use asset. and loss account made is The write-down A temporary IAS. through increased. should be The provision should be reduction in the unplanned recognized as an written back when the value of fixed Per RAS there is depreciation expense. circumstances that led to the assets is no concept of bringing the net write-down cease to exist accounted for writing back The provision book value of a and the new circumstances when closing subsequent should be written fixed asset to its Compensation for are expected to persist. The books through an increases in the back when the net sales value. loss is treated write-back should be adjustment recoverable circumstances comparable to reduced by the depreciation (provision); this amount of assets. that led to the IAS. that would have been applies particularly write-down cease

charged had the write-down to price reductions to exist and new not occurred. resulting from an circumstances are anticipated lower expected to IAS 36 Impairment of sales price than persist. The write- Assets, effective for periods the book value of back is

beginning on or after July 1, particular assets. recognized as 1999, introduces specific income. impairment tests for both

42 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 16) Republic Macedonia

impairment tests for both income. tangible and intangible assets. Where a review at

the balance sheet date indicates impairment, then the entity is required to estimate the recoverable Compensation for Compensation for amount of the asset and loss is treated loss is treated make an appropriate comparable to IAS comparable to IAS. provision. The specific rules of IAS 36 will supersede the IAS 16 provisions regarding impairments.

Any compensation for loss from third parties should be dealt with as a separate event and should be accounted for separately. [SIC 14]

Realization Revaluation reserve may be Transfer to retain The whole Revaluation Comparable to Not applicable. Not specified. Realized Comparable to The revaluation Only revaluation Comparable to Revaluation Not applicable. Not applicable. of the transferred directly to retained earnings should revaluation reserve surplus reserve is IAS. Revaluation IAS. reserve may be gains on fixed IAS. reserve is used to Revaluation is revaluation earnings when the reserve is not be made for an asset should treated as the part reserve appears in used (reduced): assets sold or increase the treated in the reserve realized. The whole reserve through the income be realized to of the profit and loss disposed are share capital. sense of adjusting for an asset may be realized statement. retained earnings shareholder’s account. • if the re-valued transferred from the carrying value upon retirement/disposal of upon equity and no assets are revaluation reserve of tangible fixed the asset or part of the retirement/disposal transfers to other Revaluation transferred or to reserve capital. assets for reserve may be realized as of the asset. reserves are reserve cannot be written off, or if inflation.

the asset is used (the considered. transferred directly the revaluation Depreciation or to retained Annual difference between is reversed; write-down is not earnings; only revaluation of cost depreciation based on • considered to give carrying value and through the profit the revaluation rise to realization and accumulated depreciation based on and loss account reserve can be of the reserve. depreciation goes historical cost). when the reserve included into the through income is realized. capital at any The transfer to statement. Comparable to The transfer to retained moment. reserve capital IAS. If the assets are earnings should not be made should not be appreciated, in through the income made through the the sense of statement. income statement. assessing their fair value, the difference between the net carrying value and the fair value goes through profit and loss statement, through extraordinary income/expense.

Retirement The asset should be removed Comparable to IAS Comparable to The asset should Comparable to Comparable to Comparable to IAS Comparable to Comparable to Comparable to The asset should Comparable to Per RAS, assets The asset should (SAS 1.3) Same s and from the balance sheet on IAS. be removed from IAS. IAS. (EASB, Balance IAS. IAS. IAS. be removed from IAS. are not required to be removed from as IAS. disposals disposal or when it is the balance sheet Sheet Accounts). the balance sheet be eliminated the balance sheet withdrawn from use and no on disposal or on disposal or from the balance on disposal or Gains or losses future economic benefits are when it is when it is sheet on when it is arising from the

expected from its disposal. withdrawn from withdrawn from permanent withdrawn from retirement or disposal of use and no future use. withdrawal from use and no future The gain or loss on disposal is economic benefits use. economic benefits tangible fixed the difference between the are expected from Carrying amount are expected from assets are proceeds and the carrying its disposal. of the asset at the The RAS does not its disposal. credited to amount and should be moment of treat gains or extraordinary recognized in the income Gains or losses disposal should losses on disposal The gain or loss on revenues and statement. arising from the be recognized as in accordance disposal is the charged to retirement or other operating with the IAS. The difference between extraordinary

disposal of an cost, while carrying amount is the proceeds and expenses item of property, proceeds from recognized in the carrying respectively. plant and disposal expenses and the amount and should equipment should respectively as proceeds are be recognized in be determined as other operating recognized in the income the difference income. income. statement. between net

disposal proceeds and the carrying amount of the asset and should be recognized as

43 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 16) Republic Macedonia

income or expense in the income statement.

Transitiona None specified. Not specified None specified. Not specified. Comparable to Not specified. Not specified. Not specified. N/A Not specified. Not applicable. Not specified Not specified. Not specified. Not applicable. l IAS. provisions

Disclosure In respect of each major class Comparable to In respect of each In respect of each Comparable to Comparable to Comparable to IAS Comparable to Comparable to State of tangible Comparable to IAS In respect of each In respect of each In respect of each Disclose: of asset: IAS. major class of major class of IAS. IAS. (EAL Appendix 3). IAS. IAS. fixed assets, major class of major class of class of assets, asset: asset: including re- • a description of asset: the asset: comparable to • measurement bases used; Revaluation not (all significant valuation, valuation disclosure IAS. • gross carrying • gross carrying used. Assets which events from the • measurement indexations, methods requirement is • depreciation method used; amount, amount and have a higher end of prior bases used; Additionally, only amounts written available under similar to IAS accumulated accumulated market value than financial year). the following is • off and the ‘Act’ adopted useful life or depreciation depreciation and depreciation at in accounting, • However • depreciation required: depreciation. by the entity rates used; net book value the beginning should be specified disclosure of method used; (including • at the end of the and end of the in notes, if material. If amounts useful life or the existence • gross carrying amount and depreciation); • constituting useful life or and amounts of accumulated depreciation period; period; and depreciation revaluation depreciation restrictions on at the beginning and end of • in respect of rates used is not • depreciation • reconciliation of reserves or their rates used; title and assets the period; and each major class required method and opening to changes are pledged as of asset – a because useful • gross carrying rates used; closing amounts considerable, they security; • reconciliation of opening to detailed life is amount and for the reporting shall be provided closing amounts analyzing • reconciliation of established by accumulated • depreciation period. in footnotes of the expenditure on significant movements opening to government depreciation at charged for the Notes relating to assets in the during the year. closing balances decision. the beginning period; Some other the Annual course of of gross carrying and end of the Also: specific disclosure Accounts • The RAS construction; • the existence amount and period; and items may be indicating the requires some and and amounts of accumulated • whether, in determining the included in the amount of the disclosure for restrictions on depreciation • reconciliation of • commitments for recoverable amount of analytical reserve as at the restoration costs title and assets showing opening to the acquisition of items, expected future cash management beginning of the but these are pledged as significant closing amounts assets. flows have been discounted report. current period, not sufficiently security. categories of analyzing to their present values; giving instances detailed. movements significant of its increase or Where revaluation: • the existence and amounts For assets which during the year; movements reduction during only required to of restrictions on title and have been during the year. the current period, • value of land in disclose the price assets pledged as security; revalued: No additional providing cases of perpetual disclosure Also: index used for those changes • accounting policy for • method of usufruct; requirement for revaluation. • restoration costs; revaluation; and reporting assets which have the existence • Assessment of the amounts of the value of fixed been revalued: and amounts of • expenditure on assets in • effective date of revaluation assets which are restrictions on value of assets: the course of construction; revaluation; reserve at the end used on the title and assets disclose basis of and of the current basis of rent, pledged as revaluation only. • the revaluation period. operating lease security; • commitments for the surplus by or similar acquisition of assets. classes of fixed Instances of agreements; • expenditure on assets. revaluation of assets in course For assets which have been long-term assets • liabilities to the of construction; revealed: shall be discussed state or local in corresponding community in • commitments for • basis of revaluation; references of the respect of the acquisition of Notes relating to obtained assets; • effective date of the Annual property rights • revaluation; Accounts, for buildings insurance of differences assets; • whether an independent and between the constructions; valuator was involved; • review of assets purchase price with market • and production • listing of the nature of any indices value cost of the assets liabilities groups used to determine significantly and their new secured on the replacement costs; higher than value being entity’s assets; carrying value; • the carrying amount of each reported for each • amounts and class of asset on a type of revalued • property leased historical cost basis; and assets. reasons for unplanned to others and Substantial sums leased from • the revaluation surplus, depreciation shall be discussed others recorded showing the movement for charges; in notes attached as off-balance the period and any to corresponding • cost of sheet item. restrictions on distribution. references. construction in progress and fixed assets In relation to manufactured provision to for entity’s own assets: needs during the period; • basis of creation • reconciliation of of such opening to provision;

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closing balance of revaluation • additions; and reserve. • disposals.

45 Comparison of International Accounting Standards and Lithuanian Accounting Policies

10. Accounting for Leases Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 17) Republic Macedonia

Classificati Finance lease - a lease that Not specified Finance lease – a Financing lease - Comparable to Comparable to Finance lease – a Comparable to Not specified. Comparable to No definition and Comparable to Finance lease is No definitions. (SAS 18.19) on of transfers substantially all the lease that usually a long- IAS. IAS with the non-cancelable IAS.. IAS. classification of IAS. recognized when Same as IAS. leases risks and rewards incidental term transaction, difference that the lease. Practice in leases provided in one or more of the transfers Strongly under to ownership. Such a lease is which transfers accounting Latvia is as the Accounting following four substantially the influence of the normally non-cancelable and substantially all concept of Operating lease – follows: Act where criteria are met: entire risks and tax law. secures for the lessor the the risks and financial lease a cancelable reference is made rewards incidental • Finance lease – recovery of his capital outlay rewards incidental does not exist, all lease. to other • The risks and to ownership. a lease that plus a return for the funds to ownership. leases are treated regulations. rewards Such a lease has transfers invested. Such a lease is as operational incidental to to meet at least substantially all normally non- In those ownership are two of the the risks and Operating lease - any lease cancelable and . regulations an transferred to following criteria: rewards other than a finance lease. secures for the operating lease is the lessee from incidental to • there is a clause lessor the a lease which the inception of ownership. Such for transfer of recovery of his meets at least one the leasing lease should ownership on capital outlay plus of the following contract; have a purchase the assets; a return for the criteria: option. • funds invested. The parties to • the lease • the ownership is Title of ownership the contract • Operating lease agreement transferred at may or may not agreed that at – any lease signed for an the termination be transferred. the end of the other than a unspecified of the contract; leasing finance lease. period; and Operating lease – contract, the ownership is any lease other • • the period of the lease transferred to than a finance agreement for a contract covers lease. Ownership the lessee; most of the specified period title is not but does not • The lessee has useful life of the transferred. leased asset. contain a the option to purchase option purchase the Operating lease - or contains a leased any lease other cancelable property, and than a finance purchase the purchase lease. option; price is not greater than • for a fixed asset 50% of the cost other than land (fair value) at - lease the date the agreement for a option is made. specified period, contains • The lease term non-cancelable is equal to 75% purchase option or more of the and the lease estimated term is for 40% economic life of or more of the the leased assets useful property even if life and the sum at the end the of minimum ownership is lease payments not transferred. in the basic lease term is less than 100% Operating lease is of the assets any lease other net book value. than finance • for land – lease lease. agreement for a specified period, contains non-cancelable purchase option and the sum of minimum lease payments in the basic lease term is less than the land market value at the moment of agreement.

Finance lease – any lease other than operating lease.

Accounting Record an asset and a Not specified Lessees record: Record an asset Comparable to The accounting Comparable to Record an asset Leased assets Comparable to Accounting Comparable to Record an asset No regulation. (SAS 1.7 1.8) treatment liability at the lower of: and a liability at IAS. concept of IAS (EASB, and a liability at should be IAS. treatment of IAS. and a liability at Same as IAS. in the • A long-term the present value financial lease included in the leases not directly the acquisition Accounting for the contracted Under the financial • the fair value of the asset; liability equal to of the minimum does not exist, all books of the addressed in the cost. Interest Leases) lease payments principle of legal

46 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 17) Republic Macedonia statements and the value of the lease payments leases are treated Leases). lease payments lessee. Normally ‘Act’. Practical payable related to principle of legal of lessees - leased contract; that are subject to as operational amount (excluding further accounting solutions are the lease is ownership, the Alternative finance • the present value of the agreement by the interest treatment derived from the recorded also at lessor accounts treatment allowed. leases (or minimum lease payments • The asset at both parties. The leased asset payable). including application of this moment. for the assets. Interest and equivalent) (discounted at the interest fair (selling) is not included in depreciation general rules. principal could be rate implicit in the lease, if price; Apportion rentals the assets of Interest payable policy should be Interest is recorded in lump Lessee usually practicable, or else at the between finance lessee, the lessee must be settled in consistent with General rules charged to the sum as a long- • recognizes the enterprise’s incremental The difference charge and deferred the the lease contract, that for owned state that fixed income statement term liability with first payment as a borrowing rate). between lease reduction of the advance registered as an assets. asset should be as a constant current portion. prepayment which contract value outstanding payment/first expense and the initially recorded periodic rate. Apportion rentals between is amortized over and the fair liability. Finance extraordinary time-proportionate at cost finance charge and reduction Depreciation the term of the value of the charge to be payment, the amount must be Accounting (acquisition price of the outstanding liability. policy is the same lease. Another leased asset as allocated as a leased price is accrued. treatment is not or production Finance charge to be as for owned way used to deferred constant periodic released over the further specified. cost), and if cost allocated as a constant assets. account for leases financial rate on the period of the Depreciation policy cannot be periodic rate on the remaining is to recognize the expense; remaining balance lease should be determined – at balance of the liability. whole amount of financial charge of the liability. agreements. consistent with that its market value at the lease as an is allocated on for owned assets. the moment of Depreciation policy should be Depreciation asset (including a constant acquisition. consistent with that for owned policy should be finance charges) basis relative to In practice if the assets. If there is no consistent with as prepayments the proportion asset’s cash price reasonable certainty that the that for owned and amortize it of installments is specified in the lessee will obtain ownership assets. over the term of in the total lease agreement, at the end of the lease - the lease and the lease contract that value is used, depreciate over the shorter of related liability is value; if not – market the lease term or the life of amortized, based • value applies. the asset. Depreciation of on payments. the leased Liability is initially Note: IAS 17 (Revised) assets which is Leases which is effective for the same as for recorded at: accounting periods beginning similar own • fixed asset on or after January 1, 1999 assets; and specifies that initial costs value; or incurred which are directly • Installments • attributable to activities sum of lease paid, which payments value performed for a finance lease, decrease the should be included as part of (not initially discounted), the the amount recognized as an recorded long- asset under the lease. difference being term liability. recorded as deferred expenses.

Rentals are apportioned between finance charge and reduction of the outstanding liability. No guidance on the allocation of finance charge is given. In practice usually straight- line basis is used.

Depreciation policy – as for owned assets. Determination of asset’s useful life may reflect legal or other restrictions of the period of asset’s use.

Accounting Rental expense should be Not specified Lessees record: Lease payments Comparable to Comparable to Comparable to Paid rental Leased assets Not defined. Not specified – in Comparable to Not specified, but Rental expense No SAS covers treatment recognized on a systematic under an IAS. IAS. IAS (EASB, expense should should be practice rentals IAS. in practice should be this area, use IAS. • Rental expense in the basis that is representative of operating lease Accounting for be recognized as included in the charged to profit comparable to recognized on a recognized on a financial the time pattern of the user’s should be Leases). an expense; not books of the and loss account IAS. systematic basis straight -line statements benefit. recognized as an paid but lessor. on a straight-line that is basis, together of lessees - expense in the concerning basis. representative of Incentives for the agreement with all costs Accounting operating income statement. amount must be the time pattern of of a new or renewed related to the treatment is not leases accrued. the user’s benefit. operating lease should be operational Belarussian further specified.

recognized as a reduction of lease statutory rules Usually monthly

the rental expense over the (commissions, regulating the rental expense is

lease term, irrespective of the taxes etc.); and banking industry agreed in the incentive’s nature or form, or specify that the contract.

the timing of payments. [SIC • The leased expense be 15] assets at fair recognized on a

47 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 17) Republic Macedonia

15] value as off- recognized on a balance sheet straight-line basis IAS 17 (Revised) specifies items. unless another

that the expense be systematic basis recognized on a straight-line is representative basis unless another of the time pattern systematic basis is of the user’s representative of the time benefit. pattern of the user’s benefit. Operating lease expenses incurred by corporate enterprises are recognized on the date of payment.

Disclosure Disclose separately: Disclose Disclose Comparable to Disclosure Comparable to Disclose: Assets owned in Disclose: Comparable to Not specified. Disclose (SAS 1.7, 1.8) in the separately: separately: IAS. separately: IAS (EASB, No prescribed according to IAS. separately: The disclosure • amount of assets subject to Not specified • amount of • value of land financial Accounting for disclosure. leasing contracts regarding assets finance leases, and related • the amount of • amount of assets subject under perpetual • amount of statements Leases). or similar subject to finance accumulated depreciation; assets subject assets subject to leases, and usufruct assets subject of lessees • irrevocable long- leases and lease to finance and to finance total lease related (operating to finance term agreements liabilities is the • lease liabilities, analyzed operational leases, and payments over accumulated lease according leases (which As a part of the shall be reported same as IAS. between current and long- leases related the period of depreciation by to IAS); are “off-balance analysis of long- at the amount term; (disclosed accumulated the term of the each major sheet”); No specific term and short- specified in the separately); depreciation; envisaged class of fixed • value of other requirements for • term liabilities leasing contract. commitments for minimum lease assets; fixed assets • lease liabilities other disclosure. lease payments under • total lease • aggregate used under (which are “off- • finance leases and non- liabilities; and amount of lease lease payments Same in HAS • lease liabilities, operating balance cancelable operating liabilities. (relating to analyzed leases or rental sheet”); leases with a term over one • the amount of financial between agreements. year, indicating amounts the deferred lessee) actually current and • options and and periods in which financial paid as at the long-term; For public contingencies payments will become due; expense related balance sheet companies to be disclosed and to finance lease date • commitments additional based on contracts. under lease disclosure of long general • • specification of significant restrictions, agreements if term finance lease requirement the future options and contingencies these liabilities is payments arising from leases. agreements required. relating to have significant IAS 17 (Revised) provides for financial leases effect on the significantly enhanced according the Company’s disclosure. actual maturity operations. periods broken

down into e.g.: due within one year, due within more than one year

This can be disclosed separately according to individual groups (classes, categories) of fixed assets.

Accounting Record in the balance sheet Not specified Lessors record: Record in the Comparable to IAS Assets held for Comparable to Record in the Leased assets Not defined. Not directly Comparable to Record in the Record in the (SAS 18.11) treatment as a receivable, at an amount balance sheet as financial leases IAS (EASB, balance sheet as should be addressed. IAS. balance sheet as balance sheet as Same as IAS. • A long-term in the equal to the net investment in a receivable in the should be Accounting for a receivable, at an included in the a receivable, at an fixed assets at receivable financial the lease. amount equal to recorded as fixed Leases). amount equal to books of the In practice a amount equal to cost less which includes statements the agreed value assets in the contracted lease lessee. receivable acquisition cost. accumulated The recognition of finance the fair value of of lessors - of leasing object balance sheet of fee (excluding recorded in the At the same time depreciation. income should be based on a the leased out finance plus expected the lessor and interest payable). balance sheet at: the interest Depreciation pattern reflecting a constant asset and the Accounting leases (or finance return depreciated in a receivable is period periodic rate of return on difference treatment is not equivalent) receipts. manner consistent Financial income recorded. (accounting and either the lessor’s net between the fair further specified. • the amount with owned (interest) must be tax as well) is the investment outstanding or value of the equal to leased assets. detailed in the term of the lease. the net cash investment asset and the The recognition of asset’s value; lease contract, outstanding in respect of the total value of finance income by The income Rental income should be finance lease. The method the lease • sum of lease (acquisition price financial should be recorded at used should be applied contract, payments value + finance institutions should recognized on a realization; time- consistently to leases of a presented as (not charges) from straight-line basis proportionate similar financial character. deferred be based on a discounted), the financial leases, over the lease amount has to be income; pattern reflecting difference being should be term. accrued. IAS 17 (Revised) specifies a constant treated as recognized on a that income must be • Write off of the deferred periodic rate of straight-line basis. recognized so as to reflect a net book value income.

constant periodic rate of of the leased return. return on the lessor’s net out asset; Method of finance

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investment outstanding. Corporate income • Financial recognition not enterprises income specified. allocated on a usually recognize constant basis finance income on relative to the a cash basis. proportion of the installments Accrual basis is in the total permitted by the lease contract rules but is not value; and obligatory.

• Installments received to decrease the initially recorded long- term receivable.

Accounting Assets held for operating Not specified Comparable to Assets held for Comparable to Comparable to Comparable to Comparable to Leased assets Not defined. Not specified – in Comparable to The treatment of Assets held for (SAS 18.19) treatment leases should be recorded as IAS. operating leases IAS. IAS. IAS (EASB, IAS. should be practice IAS. assets held for operating leases Same as IAS. in the fixed assets in the balance should be Accounting for included in the comparable to operating leases should be financial sheet of the lessor and recorded as fixed Leases). books of the IAS. is comparable to recorded as fixed Rental income statements depreciated in a manner assets in the should be lessor. Normally IAS. assets in the No SAS covers of lessors - consistent with owned assets. balance sheet of recognized based further accounting balance sheet of the treatment of Rental income is operating the lessor as a on invoice. treatment the lessor and rental income, use Rental income should be recognized taking leases separate line item (contract) including depreciated in a IAS. recognized on a straight-line into consideration and depreciated depreciation manner consistent basis over the lease term, the depreciation in a manner policy should be with owned unless another systematic applied to other consistent with calculated for the assets.

basis is more representatives. owned assets. that for other related period assets. (based on the Rental income Incentives for the agreement Financial depreciation should be of a new or renewed institutions should Accounting method agreed recognized on a operating lease should be recognize rental treatment is not between parties) straight-line basis recognized as a reduction of income on a further specified. and the agreed over the lease the rental income over the straight-line basis profit. term. lease term, irrespective of the over the lease incentive’s nature or form, or term. the timing of payments. [SIC

15] Corporate enterprises usually recognize rental income on a cash basis. Accrual basis is permitted by the rules but is not obligatory.

Manufactur Manufacturers or dealer Not specified Not specified. No statutory rules Comparable to Comparable to Comparable to No specific rules Not specified. Not defined. Not specified. Comparable to Not specified. No regulation. No SAS covers er/ dealer lessors should include selling exist in this area. IAS. IAS. IAS (EASB, regarding IAS. this area, use IAS. lessor profit or loss in the same These types of Accounting for manufacturer or period as they would for an businesses Leases). dealer lessors. outright sale. If artificially low account for leases rates of interest are charged, in the manner

selling profit should be prescribe by the restricted to that which would general law. apply if a commercial rate of interest were charged.

Not Disclose: Disclosure Disclose: Disclose: Comparable to Not specified in Comparable to Comparable to Disclose: No specific No specific Comparable to Not specified. Disclose: (SAS 18.19) in the Specified IAS. details, the leased IAS (EASB, disclosures disclosures IAS. Same as IAS. • amount of IAS. financial • gross investment in finance • gross asset is in notes Accounting for required. required. • the amount of assets subject statements leases; investment in of lessor Leases). • historical cost, assets by each to finance and of lessors finance/operatin considered as an accumulated major class of • operating related unearned finance g leases and ordinary fixed depreciation assets together leases income; related asset. and net book with related (separately • unearned value of leased accumulated unguaranteed residual disclosed); finance income assets and depreciation; values of leased assets; (for financial movement in • total lease institutions); these accounts • basis of allocating income, receivables; by each major indicating whether the and • gross return relates to net class of fixed investment in t

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investment or net cash investment in assets. investment; and • the amount of finance/operatin the deferred g leases and • where a significant part of financial related

the business comprises income related unearned operating leases, the to finance lease finance income amount of assets by each contracts. (for corporate, major class of assets which have together with related chosen accrual accumulated depreciation. basis for recording this IAS 17 (Revised) provides for type of income). significantly enhanced

disclosure.

Sale and Transactions which result in a Not specified Not specified. No statutory rules Comparable to Not specified. If the sale- No specific rules Not specified. Not defined. Not specifically Comparable to Not specified. No regulation for No standard leaseback finance lease - any excess of exist in this area. IAS. General principles leaseback is a for sale and addressed. IAS. sale and lease covers this area, transaction proceeds over the carrying of prudence and financial lease, leaseback back. Sale would use IAS. s amount is deferred and accrual used. the sales price of transactions. be recorded as amortized over the lease the asset is normal sale with term. recorded as a profit/loss liability. The asset recognized as of Transactions which result in remains in the the date of the an operating lease and which accounts of the sale. Subsequent are clearly at fair value - seller and is financial lease recognize profit or loss depreciated. No should be immediately. gain or loss is accounted for as recognized – the described above. If the sale price is below fair carrying amount value - recognize loss of the leased immediately except if it is asset is the same compensated by future as the carrying rentals at below market price, amount of the when it should be amortized sold asset. over the period of use.

If the sale price is above fair Deferred income value - defer excess and is not recognized, amortize over the period of as this is not in use. line with the definition of a If the fair value at the time of liability in EAL §3. the transaction is less than the carrying amount - recognize a loss equal to the If the flair value at difference immediately. the time of the transaction is less than the carrying amount same treatment as under IAS.

50 Comparison of International Accounting Standards and Lithuanian Accounting Policies

11. Revenue Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 18) Republic Macedonia

Scope of Principles to be applied in Comparable to IAS Comparable to Principles to be Comparable to Czech accounting Comparable to IAS Comparable to LA, LYFS, MK Comparable to Not specified. Comparable to IAS Comparable to Principles to be (SAS 18.1) standard accounting for the revenue IAS. applied in IAS. legislation does not (EASB, Revenue IAS.. regulations Nr 339. IAS. IAS. Also the applied in Revenues should arising from: accounting for define revenues in Recognition under principles apply to accounting for the be classified as revenue arising detail. The the Revenue The use by others revenues from revenues arising operating • sale of goods; from: Accounting Principle). of assets of the internally from: revenues, financial enterprise yielding • procedures for generated tangible revenues and rendering of services; and • sale of goods; businessmen, only interest, royalties and intangible • operating extraordinary or dividend is not • specifies the assets and finished activities (sale of revenues. the use by others of assets • rendering of defined, goods, sale of of the enterprise yielding recording of products stock services; and revenues. variances. own products, Extraordinary interest, royalties or revenues are dealt • rendering of dividends. use by others of services); with under assets of the comparison of IAS enterprise • financing 8. yielding interest, activities royalties or (including the dividends. use by others of assets of the enterprise yielding interest, royalties or dividends); and

• extraordinary activities.

Measureme Revenue should be measured Comparable to IAS Comparable to Revenue should Comparable to Comparable to Comparable to IAS Comparable to Not specified Not defined. No general Comparable to IAS There is no The basis for (SAS 18.69 nt of at the fair value of the IAS. be measured at IAS. IAS. (EASB, Revenue IAS. measurement equivalent measurement of Revenue should revenue consideration receivable. the fair value of the Recognition under rules specified – in definition in the revenues is not be measured at

consideration the Revenue No specific rules practice revenue RAS for fair value. exactly defined. It selling prices An exchange for receivable. Principle). regarding measured at the is however stated in invoices goods/services of a similar exchange for price specified in mentioned that and other nature and value is not goods/services. the agreement receivables should documents, less regarded as a transaction, between the be recognized at discounts which generates revenue - transacting parties. their nominal value approved either exchanges for dissimilar items Fair values or (which for certain when the sale is are regarded as generating discounting is not cases of long term made or revenue. used. receivables, can subsequently. include interest).

Rules for exchange of goods An exchange for and services not goods/services specified. (similar and dissimilar) is not specifically covered and is usually regarded as generating revenue.

Criteria for Revenue should be recognized Comparable to IAS Comparable to Comparable to IAS Comparable to Comparable to Comparable to IAS Comparable to IAS There are no Comparable to Not specified. In Comparable to IAS The criteria for Revenues should (SAS 18.6) recognition when all of the following criteria IAS. IAS. IAS. (Revenue specific criteria of IAS. practice only billed recognition are be recognized Revenue from sale of revenue - have been satisfied: Recognition under recognition of revenue is wider and more when goods are of goods should be sale of the Revenue revenue. recognized. specific in IAS than taken over by the recognized when: goods • the seller has transferred to Principle). in RAS. customer or when the buyer the significant risks To apply the service is delivered • the seller of the and rewards of ownership; guideline Revenues from to the customer. goods has accounting policy sale of goods are transferred to • the seller retains neither adopted for the recognized when the buyer all continuing managerial recognition of the the goods are risks and involvement to the degree revenue is used. delivered or at any rewards of usually associated with other moment ownership; ownership nor effective specified in the control over the goods sold; contract when the • No significant transfer of uncertainty • the amount of revenue can ownership took exists regarding be measured reliably; place. the collection • that will be it is probable that the derived from the economic benefits sale of goods; associated with the transaction will flow to the • No significant seller; and uncertainty • exists regarding the costs incurred or to be the associated incurred in respect of the costs incurred or transaction can be measured to be incurred in reliably. association with the goods;

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 18) Republic Macedonia

• No significant uncertainty exists regarding the extent to which goods may be returned;

Originally recorded revenues should be reduced also by the value of the goods that have been returned.

Criteria for Provided that all of the following Comparable to IAS Comparable to Provided that all of Comparable to Comparable to Comparable to IAS All revenue Comparable to IAS Comparable to Not specified. Comparable to IAS Not specified This is not (SAS 18.7) The recognition criteria are met, revenue should IAS. the following IAS. IAS. Revenue from (EASB, Revenue invoiced, accepted IAS. specifically revenues arising of revenue - be recognized by reference to criteria are met, long term contract Recognition under by the customer, In practice revenue covered by the from the rendering rendering of the stage of completion of the revenue should be is recognized upon the Revenue recognized when regulations. of services are performed before services transaction at the balance recognized by completion of the Principle). the balance sheet work completed recognized when sheet date: reference to the contract. date has to be and billed. Before the services have

stage of recorded as billing no revenue been completed, • the amount of revenue can completion of the revenue can be recognized or by reference to be measured reliably; transaction at the independent of the and related costs the stage of • balance sheet stage of are accumulated completion when it is probable that the date: as work-in- no significant economic benefits will flow to completion of the transaction. progress. uncertainty exists the seller; • the amount of Revenue for work regarding: revenue can be • billed in advance the stage of completion at measured • the performance should be deferred the balance sheet date can reliably; of the service and charged to be measured reliably; and and the • profit and loss • a contractually account when consideration to the costs incurred, or to be agreed stage is incurred, in respect of the completed. be derived from completed and it, transaction can be measured accepted by reliably. customer. • the costs incurred or to be When the above criteria are not met, revenue should be incurred in rendering the recognized only to the extent of the expenses recognized that services. are recoverable.

Criteria for Provided that: Comparable to Comparable to Provided that: Comparable to Comparable to IAS Comparable to IAS Not specifically There are no Comparable to IAS Not specific Comparable to IAS The RAS has no Revenue should (SAS 18.10) recognition IAS. IAS. IAS. except of dividends (EASB, Revenue defined in HAS but specific criteria of for interest. guidance. equivalent be recognized as Financial revenues • it is probable that the • it is probable of revenue - Recognition under generally the same recognition of concept. follows: should only be economic benefits will flow to that the Dividends are Not defined for In practice straight interest, the Revenue treatment is revenue. recognized when the enterprise; and economic recorded when royalties and line method for • interest - on a royalties Principle). accepted. no significant benefits will flow approved (at the To apply the dividends. interest revenue time proportion and • uncertainty as to dividends the amount of revenue can to the enterprise; general meeting). guideline basis that takes their amount or Treatment of be measured reliably and accounting policy into account the collectability exists. dividends not adopted for the effective yield; Interests are revenue should be recognized • specified, but cash the amount of recognition of the recognized on a as follows: basis is used in • revenue can be revenue is used. royalties - on an time proportion measured practice. accruals basis in • interest - on a time basis taking reliably Treatment of pre- accordance with proportion basis that takes account of the acquisition the substance of into account the effective principal revenue should be dividends not the relevant yield; outstanding and recognized as specified. agreement; and follows: the rate applicable. • royalties - on an accruals • dividends - Dividends from basis in accordance with the • interest - on a when the investments in substance of the relevant time proportion shareholder’s subsidiaries are agreement; and or cash basis right to receive accounted for (optional); under the equity • dividends - when the payment is established. method when the shareholder’s right to receive • royalties - on a investor’s share of payment is established. cash or accruals the profits or basis in losses of the

accordance with investor is the substance of established, while the relevant the dividends from agreement associates are (optional); and accounted for under the cost • dividends - method when the when the shareholder’s right shareholder’s to receive payment right to receive is established. payment is established or (SAS 18.3) The

52 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 18) Republic Macedonia

on a cash basis financial revenues (optional). appear in association with long- and short- term investments and comprise received interests and dividends or other shares of other enterprises’ profit when there is no reasonable doubt with regard to the size, maturity and collectability of the amount due. •

Disclosure Disclose: Comparable to Disclose Disclose: Comparable to Comparable to Comparable to IAS Disclose: Disclose: Disclose: Disclose: Disclose: Disclose: Disclose: Disclose: IAS. separately if the IAS. IAS, Revenues (EAL Appendix 3). • the accounting policies • the accounting • the accounting • Operating • the accounting • accounting • the amount of • revenue from • the accounting item is material: split to domestic • the accounting adopted for the recognition of policies adopted revenues and policies adopted policies adopted results. policies adopted policies revenue desired sale of own policies adopted • revenue, including the the amount of for the export for the for the Revenue from for revenue from sale of products/goods for the • operating methods adopted to revenue derived recognition of recognition of recognition of sales and recognition; goods, and rendering of recognition of revenue determine the stage of from sale of revenue; the revenue; revenue services must rendering of services per revenue, completion of transactions goods, amount of be presented • the amount of service, interest segments, i.e. including the • interest involving the rendering of rendering of revenue derived • amount of according to revenue derived royalties, and main business methods income services; services, from sale of export and each significant from sales of dividend lines and main adopted to interest, goods, domestic sale; kind of activity. products • territories; determine the • the amount of revenue (including foreign royalties and rendering of and exchange stage of derived from sale of goods, other revenue. services, • Revenue and rendering of • revenue from completion of gains rendering of services, interest, • details of export expenses from services), goods sale of own transactions interest, royalties and financial for resale and royalties and revenue by • other income products/goods involving the dividends; and dividends; and geographical activities. materials, sales and rendering of rendering of markets; Enterprise if free of fixed assets, services relating • services; the amount of revenue in • the amount of to choose the grants, to related each category arising from revenue in each detailing criteria dividends and parties; • the amount of exchanges of goods or category arising for gain and interest. revenue derived services. from exchanges loses. • interest income, from operating of goods or For public separately activities: sale of

services. companies related parties; goods, On the face of separate • rendering of financial disclosure of income from services; statements the dividends and financial financial following kind of interest from investments, activities: revenue should be subsidiaries, separately interest, disclosed: associates and related parties; royalties and parent company. • extraordinary dividends, • Turnover from revenue if exchange rate sales of goods; material, differences, separately revaluation • Turnover from related parties; result; and services extraordinary rendered; • revenue relating items. to prior • • Other operating accounting Revenues on revenue; periods if domestic and material, foreign market. • Revenue from disclosed financial and • Related parties amount and investing disclosure. description. activities; • Capitalized own • Extraordinary products. gain.

53 Comparison of International Accounting Standards and Lithuanian Accounting Policies

12. Employee Benefits Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 19) Republic Macedonia

Scope of Applies to all retirement benefits Not specified. NAS 19 specifies There are no Comparable to Not specified. Not specified. Not specified Regulation Nr.253 Not defined. There is no Not specified. There is nothing in No regulations. Not specified. Standard provided under retirement benefit accounting for all statutory rules in IAS. On pension fund’s retirement benefit Retirement Benefit the RAS plans. employee-related this area in view of Note: In the Czech year statement system in Poland Costs are equivalent to this costs. the fact that environment, except for national specified in the law IAS. Note: under IAS 19 (Revised) retirement benefit enterprises are not pension fund and on employees Employee Benefits, which is plans are not allowed to provide since 1999 retirement effective for accounting periods practiced. many post- obligatory private contributions beginning on or after January 1, employment or retirement system under the State 1999, the scope of the standard All Belarussian long-term benefits, (both defined regulations. has been extended to address entities are obliged including contribution other forms of employment to make pensions, life systems). benefits such as short-term contributions to the insurance and employee benefits, termination State pension similar benefits as Some companies benefits, equity compensation fund. defined by IAS 19. are obliged to pay benefits and other long-term These benefits are one-off benefits to employment and post-retirement provided either by entitled employees benefits. state (pensions) or at the moment of specialized their retirement enterprises (defined benefit (pension funds, systems), but insurance there is no direct companies). obligation to provide for such liabilities.

Defined Contributions in respect of service Not specified. Recognize and Not applicable. Comparable to Not specified. Not specified. Not specified Comparable to Not defined. Comparable to Not specified. There is nothing in No regulations. Not applicable. Contribution in a particular period should be disclose expenses IAS. IAS. IAS. the RAS For certain Plans recognized as an expense in that in the period. equivalent to this contribution period. No specific IAS. schemes where disclosures defined Disclose: required. contribution plans are in place, • general description of the plan, contributions are including employee groups expensed. covered;

• expense recognized in the period; and

• any other significant matters related to retirement benefits.

Defined Recognize as an expense in the Not specified. Comparable to Not applicable. Comparable to Not specified. Not specified. Not specified Comparable to Not defined. Not specified. Not specified. There is nothing in No regulations. Not applicable. Benefit Plans current period. IAS IAS. IAS. the RAS In practice (to the equivalent to this extent it is IAS. applicable) Recognition recognized as an of current expense in the service cost current period.

Recognition For existing employees - past Not specified. Not specified. Not applicable. Comparable to Not specified. Not specified. Not specified Regarding Not defined. Not specified. Not specified. There is nothing in No regulations. Not applicable. of cost other service costs, experience IAS. termination, the RAS Based on general than current adjustments and the effects of curtailing or equivalent to this rules (if applicable) service cost changes in actuarial assumptions settlement IAS. recognized in the or plan amendments should be comparable to IAS current year profit spread systematically over the and loss account expected remaining working lives of the employees, except for as ‘prior period’ certain plan amendments when adjustment. the use of a shorter period is a better reflection of the receipt of economic benefits by the enterprise (e.g. when the plan is amended regularly it may be better to spread the effect over the period to the next plan amendment).

When it is probable that a plan will be terminated or that the benefits will be curtailed or settled:

• any resulting increase in the enterprise’s liabilities should be recognized immediately as an expense; and

• any resulting decrease in the

54 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 19) Republic Macedonia

enterprise’s liabilities should be recognized as income in the period when the event occurs.

For retired employees, reflect the present value of planned amendments in the period in which the amendment is made.

Actuarial Benchmark - use accrued benefit Not specified. Accrued benefit Not applicable. Comparable to Not specified. Not specified. Not specified Not specified. Not defined. None specified. Not specified. There is nothing in No regulations. Not applicable. Valuation valuation method. valuation method IAS. the RAS Methods should be applied equivalent to this Allowed Alternative - use projected only. IAS. benefit valuation method.

The effect of a change in method to be accounted for and disclosed as a change in accounting policy.

Actuarial Assumptions to be used should be Not specified. Assumptions to be Not applicable. Comparable to Not specified. Not specified. Not specified Not specified. Not defined. Not specified. Not specified. There is nothing in No regulations. Not applicable. Assumptions appropriate and compatible, used should be IAS. the RAS incorporating projected salary unbiased and equivalent to this levels to the date of retirement. mutually IAS. compatible and should incorporate:

• demographi c assumptions , including mortality rate, employees turnover rates, claim rates under medical plans, etc.

• financial assumptions , including discount rate, future salary and benefits levels, future medical costs, expected rates of return on plan assets, etc.

Disclosures - Disclose: Not specified. Disclose: Not applicable. Comparable to Not specified. Not specified. Not specified Comparable to Not defined. Disclose: Not specified. There is nothing in No regulations. Not applicable. defined IAS. IAS. the RAS benefit plan • general description of the plan, • general • accounting equivalent to this including employee groups description of policies IAS. covered; the plan adopted,

• accounting policies adopted, • accounting • based on and a description of the actuarial policies adopted disclosure valuation method; for recognition requirements for of actuarial all classes of • whether or not the plan is gains and provisions – the funded; losses movement of • the provision expense/income recognized in • the present balance in the the period; value of the period showing • liabilities for opening the actuarial present value of future benefits; promised benefits per the most balance, recent actuarial report; • increases, fair value of the applications and • plan’s assets by decreases in the fair value of the plan’s assets at category; the date of the most recent year and closing actuarial valuation; • summary of the balance. • principal any prepayment or accrual. actuarial

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 19) Republic Macedonia

Where an employer has more actuarial than one plan, prepayments and assumptions accruals on different plans used and details should not be offset; of any changes;

• summary of the principal • expenses actuarial assumptions used and attributable to details of any changes; the length of service and • the date of the most recent effect of plan actuarial valuation and the termination. frequency of such valuations; and

• any other significant matters, including the effects of a plan termination, curtailment or settlement that affect comparability with the previous period.

56 Comparison of International Accounting Standards and Lithuanian Accounting Policies

13. Accounting for Government Grants and Disclosure of Government Assistance Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 20) Republic Macedonia

Criteria for Government grants should not Comparable to IAS Comparable to Comparable to Comparable to Not specified, Comparable to IAS Government Comparable to Not defined. Not specified. Not specified The RAS does not No regulation, but (Sas 18.6) Same recognition be recognized until there is IAS. IAS. IAS. however general (EASB, grants should not IAS. require equivalent the general as IAS. reasonable assurance that: principles apply Government be recognized conditions. practice is leading to the grants). until: comparable to IAS: • the enterprise will comply treatment with the conditions attaching; comparable to IAS. • the grants have and been received.

• the grants will be received.

Income Recognize as income over the Recognition as Recognition of Recognized as a Comparable to Comparable to IAS Comparable to IAS From 1997 Comparable to Not defined. Grants relating to Not specified The RAS allows Recognize as Same as IAS. recognition period necessary to match income criteria income: component of IAS. (except the (EASB, recognition of a IAS. assets (specifically grants to be taken income over the them with the related costs, for comparable to IAS. equity at the treatment Government grant is done construction in to equity. period necessary (SAS 1.3) which they are intended to • for grants related moment of receipt. described in the Grants). through the profit Grants other than process and to match them with Government compensate, on a systematic to depreciable following and loss account, in monetary form development the related costs, grants for the basis - not to be credited assets – Grants other than paragraph) and it is not are usually costs) – recognize for which they are purchase of

directly to equity. recognize as in monetary form permitted to recorded at market as other operating intended to tangible fixed income over the usually recorded at Grant received value, if it is assets remain part recognize it directly income compensate, on a Even where there are no period to match a nominal amount. specifically in order to equity. If the impossible, this proportionately to systematic basis - of provisions and conditions attached to the Not further them with the to improve the grant can be fact must be relevant not to be credited will be disbursed assistance specifically relating specified. related costs capital of the connected to some shown in the depreciation directly to equity. according to the to the operating activities of the (depreciation), company (i.e. grant type of costs or financial charges. depreciation enterprise (other than the on a systematic not intended to assets, the statement’s Grants receivable expenses.

requirement to operate in basis; cover the costs or company has to annexes. Other grants should be recorded certain regions or industry costs of fixed should be credited in the period when match the grant to sectors), such grants should • for grants related assets) should be directly to income. the grant is the costs or not be credited to equity. [SIC to non- credited to equity. assets. The grant approved, even 10] depreciable has to credit when the period is The treatment of assets, as well directly to reserves different to the A grant receivable as grants other than as tax if specified law or period when the compensation for costs already in monetary form is concession – other regulation grant costs are incurred or for immediate not specified. recognize as allows. accrued. financial support, with no future income on a related costs, to be recognized Grants other than systematic basis A grant receivable as income in the period in determined by as compensation in monetary form which it is receivable. the enterprise for costs already should be recorded over a period not incurred or for as an asset at zero Grants other than in monetary exceeding 20 immediate financial value. form usually recorded at fair years. support, with no value, but sometimes recorded future related at a nominal amount. Grants other than costs, to be in monetary form recognized as are recorded at fair income in the value. period in which it is receivable.

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 20) Republic Macedonia

Presentatio Grants relating to assets may Not specified Grants, related to Presented on the Comparable to IAS Grants relating to Business Grants relating to Comparable to Not defined. Grants relating to Not specified Grants are Grants (monetary) (SAS 10.1) n be presented as deferred depreciable assets balance sheet as a assets should be enterprises record fixed assets may IAS. assets should be recorded and can only be separately income or by deducting the are presented as separate item in deducted from the and present grants be presented as presented as presented in presented as disclosed as long- grant from the asset value. separate long-term equity. asset value. related to assets income, but should deferred income. reserves and deferred income term provisions.

item on the face of as a deduction be accrued, and transferred to Grants relating to income may Statement of Grants relating to Grants relating to Grants relating to Grants relating to the balance sheet. from the assets the accruals may share capital when be reported separately as changes in equity income are value. be reversed when income should be assets acquired cost should be income should be ‘other income’ or deducted Grants relating to discloses presented the company reported are being used. recorded as other reported from the related expense. income are reconciliation of comparable to IAS. Non-profit books the separately under operating income. separately as presented as grant balances organizations, depreciation. ‘other operating Grants related to operating income. separate item outstanding at the trusts, and income’ heading. income are within the beginning and end government If the grant is not recorded and operating revenue. of the year. reporting entities related to fixed presented record and present assets, that part of separately as grants related to the grant that is not “Income from assets as a liability. covered by costs in grants received”. the same period when the company received the grant, must be accrued and reversed when the costs are incurred.

Grants received for development purposes or not directly related to the normal business activities of the company must be presented as extraordinary revenue and should be accrued, and the accruals may be reversed when the company books the depreciation for these assets.

Grants received directly related to the normal business activities of the company must be presented as other revenue.

Repayment A grant becoming repayable Not specified Repayment of a No statutory rules Comparable to Not specified Comparable to IAS If the grant must Comparable to Not defined. Not specified. Not specified There is no Repayment of a No standard should be treated as a change grant related to in this area exist. IAS. (EASB, be repaid in the IAS. equivalent in the grant related to: covers this area, in estimate. income or asset: However general Government future, it must be RAS. use IAS where principles apply Grants). recorded as a • income - should possible.

Repayment of a grant related • should be leading to the normal liability be applied to: applied against treatment when the against any any related not comparable to IAS. transaction related • income - should be applied amortized grant occurred. unamortized against any related liability, and the deferred credit, unamortized deferred credit, balance as an No further and the balance and the balance as an expense. treatment as an expense; expense; and specified. and • an asset - should be treated • an asset – as increasing the carrying should reduce value of the asset or the deferred reducing the deferred income income balance. The balance, and cumulative depreciation, the balance as which would have been an expense. charged had the grant not been received, should be charged as an expense.

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 20) Republic Macedonia

Disclosure Disclose: Not specified. Disclose: No disclosure is Comparable to Not specified, Comparable to IAS Disclose: Comparable to Not defined. Disclose: Not specified • Not specified No disclosure is No standard required. IAS. general principle (EASB, IAS. required. covers this area, • the accounting policy • conditions requiring Government • If the company • the amount of use IAS. adopted, including the attaching to the disclosure of Grants). received grants deferred income

method of presentation in grants; material from a in respect of the financial statements; Governmental unamortized • information would the accounting apply. Fund has to balance of • the nature and extent of policy adopted, disclose the grants received; grants recognized and an related to amount indication of other forms of recognition of received, the • amounts of government assistance; and income; utilization of the grants charged to income in the • • amount per year unfulfilled conditions and the nature and and per project year. other contingencies extent of grants in the attaching to government recognized and Supplementary assistance that have been an indication of Notes. recognized. other forms of government assistance; and

• unfulfilled conditions and other contingencies attaching to government assistance that have been recognized.

59 Comparison of International Accounting Standards and Lithuanian Accounting Policies

14. The Effects of Changes in Foreign Exchange Rates Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 21) Republic Macedonia

Transactio Record initially at the rate of Comparable to Record initially at Record initially at Comparable to Comparable to Comparable to IAS Record initially at Record initially at Comparable to Record initially: Comparable to Comparable to Record initially at (SAS 5.10) ns exchange at the date of the IAS. the rate of the rate of IAS. IAS. (EAL § 26), Bank the rate of the Bank of IAS. IAS. IAS, National Bank the rate of Receivables • cash, transaction (use of averages exchange at the exchange at the of Estonia exchange at the Latvia’s rate of of Romania exchange at the toward foreign Comparable to investments and permitted if a reasonable date of the date of the exchange rate date of the exchange at the exchange rate date of the legal or natural IAS: Central securities - at approximation of actual). transaction. transaction. quoted at the date transaction, using date of the quoted at the date transaction (official persons are Bank’s (CNB) the buying or of the transaction buying rate in transaction. of the transaction rate of exchange translated into At subsequent balance sheet Monetary balances At subsequent official closing selling rate of . must be applied. case of receivable must be applied. published by expressions of the dates: are retranslated at balance sheet exchange rate At subsequent the entity’s bank; and cash, selling National bank of local currency at the closing dates: should be used. Comparable to IAS balance sheet Comparable to rate in case of Slovakia) the exchange rate retranslate monetary exchange rate (EAL §26) the dates: • other assets and IAS, the treatment payable. effective on their balances using the closing retranslate monthly, with retranslate Treatment of non- treatment shall liabilities – at the shall restate At subsequent date of origin. The rate; monetary exception of banks monetary monetary items not restate monetary • retranslate average monetary assets balance sheet At year and: exchange rate balances using and financial balances using specified. assets and monetary National Bank and liabilities dates: non-monetary items deficit or surplus the closing rate; institutions where the closing rate; liabilities • balances rate at the denominated in carried at historical cost cash: the generated by the retranslation is denominated in using the transaction date foreign currencies retranslate should not be retranslated; non-monetary year-end settlement date or non-monetary effected daily. foreign currencies closing rate; unless customs using the national monetary and items carried at buying rate the balance sheet items carried at using the Bank of clearance Bank of Romania balances using historical cost is used if the LR FM letter Nr. date should be historical cost Estonia exchange documents give exchange rate the closing rate; non-monetary items should not be foreign 23/24 as of treated either as should not be rate quoted on the a different rate. quoted on the carried at fair value retranslated; exchange 26.10.94 non-monetary an item of financial retranslated; balance sheet balance sheet denominated in foreign and rates per items carried at revenue or an item and date. At subsequent date. currency should be reported book are balance sheet historical cost of financial at the rate on the date of not specified non-monetary higher than dates: should not be expenses. valuation. items carried at the year-end retranslated. fair value rate. • non-monetary (SAS 11.9) Short- denominated in Otherwise, items – carried term liabilities to

foreign currency the historical at cost foreign legal or should be natural persons rate is used, reported at the • monetary items should be • translated into rate on the date receivable, – retranslate of valuation. prepayments using the expressions of the : If the National Bank local currency at company. average rate for the exchange rate receives a given currency effective on the money by at the balance date of their

balance sheet date. accrual. The sheet exchange rate gain preparation or loss generated day, should by the settlement use the date and/or the buying rate balance sheet date of the date should be treated of financial as an item of either settlement. financing expenses If the or financing receivable is revenues. still outstanding at balance sheet preparation date, the company has to use the year-end buying rate if it is lower than the historical rate. Otherwise, the historical rate is used,

• payable, accruals: if the company pays back the money by balance sheet preparation day, then the selling rate of financial settlement. Is used. If the payable is still outstanding at balance

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 21) Republic Macedonia

sheet preparation date, the company should apply the year-end selling rate if it is higher than the historical rate. Otherwise, the historical rate is used,

• other items carried at fair value denominated in foreign currency should be reported at the rate on the date of valuation.

Recognition Differences arising on the Comparable to Comparable to The revaluation Comparable to Differences arising Comparable to IAS Differences arising Comparable to Comparable to Differences arising Comparable to IAS Differences arising Differences arising (SAS 5.10, 11.9) of settlement or on the re- IAS. IAS. gains and losses IAS. on the settlement (EAL §26). on the settlement IAS’s Benchmark. IAS. on the settlement on the settlement on the settlement See above. exchange translation of monetary items at are deferred in the of monetary items or on the or retranslation of of monetary items or on the re- differences rates different to those at which following way: net (realized) should retranslation of No alternatives cash balances (or at rates different to translation of No exception as they were originally recorded foreign exchange be dealt with as monetary items at allowed. non-monetary those at which they monetary items at under IAS exist.

should be dealt with as difference for a income/expense in rates different to items if required) at were originally rates different to

income/expense in the period period is deferred the period in which those at which they the balance sheet recorded are those at which they in which they arise. and monthly they arise. were originally date should be recognized as were originally If the action has No exception as written off to PL recorded should be dealt with as income/expense in recorded should be An exception is allowed when not finished during under IAS exist. account in the Differences arising dealt with as financial the period in which dealt with as there has been a severe the current period, amount equal to on the retranslation income/expense in income/expense in they arise. income/expense in devaluation of a currency the exchange 10 % of cost of of monetary items the period in which the profit and loss the period in which against which there is no differences are goods sold which (unrealized) should they arise. The account of the Differences arising they arise except

practical means of hedging, recorded as is charged to be recorded as foreign exchange period in which on retranslation for income related affecting liabilities which cannot other assets or are recognized in possible expenses during gains or losses on they arise. to retranslation that be settled and which arise income/expenses. the respective liabilities, except those receivables the balance sheet is not posted to directly from the recent The possible period for differences or payables which Differences arising as unrealized profits. acquisition of an asset invoiced income is neutral arising on were settled by the on retranslation of foreign exchange in a foreign currency. In such and it is not Specific retranslation of balance sheet monetary items loss / unrealized Retranslation of circumstances, the difference included in the regulations exist in cash or cash preparation date other than cash foreign exchange investments, . may be added to the carrying profit/loss for the the banking equivalents that relate to the should be dealt gain. payables, amount of the related asset, year. The possible industry, which should be dealt current year, not to with in the receivables and For a limited provided that the resultant loss is included in implies that at any with as the year of following way: loans (monetary (specified by law) amount does not exceed the the profit/loss for date a part of income/expense. financial items) in foreign • an excess of number of lower of replacement cost and the year with the arising exchange settlement. currency is Provision for transactions the recoverable amount. help of a sum that differences is kept exchange losses accounted against unrealized differences arising is forecasted for a on currency The foreign over exchange special balance This exception can only be retranslation on settlement or on provision. position accounts exchange gain or gains which sheet accounts applied where the relevant and can be losses is loss on receivables relates to the retranslation of (“Unrealized liabilities could not have been computed as a recommended as or liabilities has to same foreign monetary items is foreign exchange settled and it was impracticable difference obtained appropriate. be recorded in currency should recognized in losses” and to hedge them prior to the by setting off these other income or be recognized equity, as other “Unrealized foreign Differences severe devaluation or accounts against expenditure. The as a financial reserves. exchange gains”) relating to depreciation of the reporting each other. The foreign exchange expense; For unrealized acquisition of fixed currency. These Belarussian gain or loss on foreign exchange assets should form • circumstances are expected to National Bank cash has to be an excess of losses is then part of the cost of occur very rarely. [SIC 11] prescribes recorded as other exchange gains created special the fixed asset. methodology financial revenue over exchange provision in the losses according to which or other financial liabilities/expenses. the exchange expenditure. respectively differences are No exception as should be Retranslation of eventually under IAS exist. included in cash is made recognized as deferred income directly to profits. income/expense. (except for banks where it In the case of the should be recent acquisition recognized as of an asset income). invoiced in a foreign currency during the period of getting it ready for its intended use or sale (qualifying asset) the

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difference should be added to the carrying amount of the related asset.

Exchange Differences arising on a Not specified. Not specified In accordance with Comparable to Not specified. Comparable to IAS Not specified. Not specified. Comparable to No specific Comparable to IAS Not specified. See treatment No standard differences monetary item that, in the statutory rules IAS. (EASB, IAS. regulations on described above. covers this area, dealt with in substance, forms part of an there are no Accounting Consolidated such monetary use IAS. reserves investment in a foreign exchange principles do not Accounts). items.

enterprise (settlement neither differences dealt assume recording any differences Hedge of net planned nor likely to occur) with in reserves. should be dealt with in with in reserves. investment method reserves until the disposal of not allowed. Principles the net investment, at which described above time they should be recognized should apply. as income/expense. N/A Differences arising on a foreign currency liability accounted for as a hedge of an enterprise’s net investment in a foreign entity should be dealt with in reserves until the disposal of the investment, at which time they should be recognized as income/expense.

Forward Not specified. Not specified Not specified. Forward contracts Comparable to Not specified. Forward contracts Not specified. Comparable to IAS Not specified. Not specified. Not specified Not specified. Only disclosure No standard contracts are accounted for IAS. are recognized and 39. required but covers this area, on off balance measured in accounting use IAS. sheet accounts till accordance with treatment is not value date. On the IAS 39 (EASB, specifically value date The Annual Accounts covered. transactions and of Credit resulting exchange Institutions). differences are recorded on the balance sheet in the regular order.

Consolidate Translated using the temporal Not specified Not specified. The statutory rules Comparable to Not specified. Comparable to IAS Not specified. Not specified. Not defined. Foreign operations Not specified No consolidated Temporal method Financial d financial method (i.e. as if all of the do not prescribe IAS. (EASB, are not accounts are is not allowed, only statements of the statements transactions had been entered any requirements Consolidated distinguished from prepared. standard subsidiary are item into by the reporting enterprise as to consolidation Accounts). foreign consolidation using by item translated

Foreign itself). Translation adjustments of subsidiaries. subsidiaries and acquisition into expression of operations are included in net income. translated using accounting for the local currency that are general rules for subsidiary is at exchange rates integral to self-sustaining allowed. effective on the the foreign entities. balance sheet operations date. Currency of the translation reporting adjustments are enterprise included in net income

Self- Translated as follows: Not specified Comparable to IAS Not specified. Comparable to Not specified Comparable to IAS There are two Not specified. Not defined. Translated as Not specified Not specified. Translated as Translated as sustaining except that use of IAS. (EASB, options for follows: follows: follows: foreign • assets and liabilities average for Consolidated translation of the entity translated at the closing rate; translation of Accounts). balance sheet: • assets and • assets and • assets and liabilities - at the liabilities liabilities • income and income and expenses expenses items is • every balance closing rate translated at the translated at the translated at the rates ruling not specified. sheet item is defined as the closing rate; closing rate; at the date of the transaction translated at the average (use of average acceptable), official exchange National Bank • income and • income and except when the entity rate of the rate ruling at the expenses expenses reports in the currency of a Hungarian balance sheet translated using translated at the hyper-inflationary economy, National Bank date; closing rates; rates ruling at when the closing rate should the date of the as at the date of • be used; and the financial • income and translation transaction (use statements, expenses – at adjustments are of average • translation adjustments are the average rate reported as acceptable), reported as a separate • tangible, defined as the financial except when the component of shareholders’ intangible arithmetical expense/income entity reports in equity. assets, long- average of . the currency of a term National Bank hyper-

investments and average rates inflationary the items of on the last day economy, when

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equity (without of each month the closing rate profit of the during the should be used; year) are financial year; and translated at historical foreign Translation • translation exchange rate. adjustments adjustments are In case of other reported as a reported through items the separate P&L company has to component of

use official shareholders’ Hungarian equity. National Bank rate,

• the second option allows for the translation difference, which has to be recorded as other revenue or other expenditure; the profit of the year necessarily changes.

For the profit and loss account there are two translation possibilities:

• in case of revenues we use the month- end buying rate,

• for capitalized value of own performance, profit before tax, profit after tax, corporate tax we use the Hungarian National Bank rate,

• for depreciation, material- type costs, write-off of assets, the Hungarian National Bank rate or monthly end selling rate is used,

• if we apply the second method, the difference of the translated revenue and expenditure will not be equal to the profit translated at Hungarian National Bank rate. The difference has to be recorded as other revenue/expendi ture. The amount of profit is not allowed to change.

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Disposal of The amount of the exchange Not specified Not specified. Not specified. Comparable to Not specified. Comparable to IAS Not specified. Not specified. Not defined. Similar as in IAS. Not specified No specified. Not specified. Not applicable. foreign differences previously deferred IAS. (EASB, entity should be recognized as Consolidated income or expense in the Accounts). period in which the gain or loss on disposal is recognized.

Foreign The financial statements of the Not specified Comparable to Not specified. Comparable to Not specified. Not specified. Not specified. Not specified. Not defined. Not specified. Not specified Not specified. No regulation on No SAS covers entity foreign entity to be restated as IAS. IAS. hyperinflation this area, use IAS reported in required by IAS 29 Financial accounting. 29. the Reporting in Hyper-inflationary In practice – no currency of Economies before translation restatements. a hyper- into the reporting currency. inflationary economy

Reclassifica Revised translation procedures Not specified Comparable to Not applicable. Comparable to Not specified. Not specified. Not specified. N/A Not defined. Not specified – no Not specified Not specified. Foreign operations No SAS addresses tion of a should be applied from the IAS. IAS. category of a are not specified this; use IAS. foreign date of reclassification. foreign operation. and such operation companies would be accounted using standard approach for consolidation of subsidiaries.

Disclosure Disclose: Comparable to IAS Disclose: No requirements Comparable to Specific Comparable to Not specified. Not specified Not defined. Disclosure: Disclose: Disclosure: Disclosure: Disclose: specified. IAS. disclosures IAS. • exchange differences • exchange required: • net exchange • gross • exchange • exchange rate • exchange included in the net profit or differences differences from amount of differences differences in differences loss for the period; included in the • method of translation of exchange included in the net profit or included in the net profit or loss retranslating foreign entities differences the net profit loss for the net profit or loss • net exchange differences for the period; monetary items classified as should be or loss for period and on for the period; classified as equity and a and to local currency equity at the included in the period. the balance reconciliation of the amount beginning and the profit and sheet, No further of such differences at the • movement of end of the loss account No further disclosure beginning and end of the reserve for period. disclosure • reserve for requirement period; unrealized requirements exchange rate specified. retranslation specified.. losses balance • differences arising during the losses and movements period included in the The only reporting during the year, carrying amount of an asset; No other currency is • and disclosure “Romanian lei”. exchange rate specifically translation • the method selected to required. General principles used. translate goodwill and fair principle requiring value adjustments arising on disclosure of the acquisition of a foreign material entity. information would apply. Disclose the reason for any change in reporting currency and, when the reporting currency is different to that of the country in which the enterprise is domiciled, the reason for using that currency.

64 Comparison of International Accounting Standards and Lithuanian Accounting Policies

15. Business Combinations Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 22) Republic Macedonia

Not specified Applicable IAS 22 applies to all business Not specified Comparable to No statutory rules Comparable to Czech legislation Comparable to LYFS, LR FM Not defined. Accounting Act, Comparable to IAS There is nothing in Specific solution No SAS, use IAS. standards combinations. IAS. in this area exist. IAS. covers only some IAS. regulations. 1994. the RAS for business cases where IAS equivalent to this combination is not 22 is applicable. Decree of the IAS. defined. Standard The following are Minister of Finance consolidation the areas covered on preparation of policies for by Czech consolidated consolidating legislation: financial subsidiaries to be statements for applied. • acquisition of entities other than net assets, banks, 1995.

• compilation of consolidated statements,

• mergers (accounting treatment is almost not defined).

Czech law does not provide comprehensive details.

Pooling of A pooling of interests is ‘a Not specified. Comparable to Not applicable. Comparable to Merger Comparable to IAS Comparable to N/A Not defined. Pooling of interest Comparable to IAS Not specified. No regulation. No SAS, use IAS. interests / business combination in which IAS. IAS. accounting/uniting (EASB, Business IAS. is not an allowed merger the shareholders of the of interest is not Combinations). method of accounting: combining enterprises combine specified under accounting for control over the whole, or Czech accounting business effectively the whole, of their net legislation at all. combinations. The assets and operations to purchase method

achieve a continuing mutual must be applied. sharing in the risks and benefits attaching to the combined entity such that neither party can be identified as the acquirer’.

Criteria for Indications are: Not specified No criteria for use Not specified. Comparable to Not specified. Comparable to IAS Comparable to IAS N/A Not defined. Not specified. Comparable to Not specified. No regulation. No SAS, use IAS. use of of pooling of IAS. (EASB, Business IAS. pooling of • management’s of the interests / merger Combinations). interests / combining enterprises accounting merger participate in the specified in the accounting management of the combined NAS. entity;

• the substantial majority of the voting common shares of the combining enterprises are exchanged or pooled;

• the fair value of one enterprise is not significantly different from that of the other enterprise; and

• shareholders of each enterprise maintain substantially the same voting rights and interest in the combined entity, relative to each other, after the combination as before.

A business combination should be classified as an acquisition unless the last three characteristics outlined above are present. Even if all three are present, the combination should be presented as an uniting of interests only if the enterprise can demonstrate that an acquirer cannot be identified. [SIC 9]

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Contra-indications are:

• financial arrangements provide a relative advantage to one group of shareholders; or

• one party’s share of the equity in the combined entity depends on how the business, which it previously controlled, performs subsequent to the business combination.

Application Use of pooling of interests Not specified Comparable to Not specified. Comparable to Not specified. Comparable to Comparable to Not specified. Not defined. Not specified. Comparable to IAS Not specified. No regulation. (SAS 8.13) of pooling method is mandatory if definition IAS. IAS. IAS, except for the IAS except for the fact Business of interests / is met: fact that pooling that pooling can combinations merger can only be used only be used in the operating as one accounting • combine financial statement in the case where case where the entity upon a items of uniting entities, in the resultant resultant company completed merger both the current and prior company is not is not identifiable should be periods, as if they had been identifiable from from the original accounted for on united from the beginning of the original parties. parties. the basis of the the earliest period presented; pooling of interests

• method: in addition any difference between the to combining the amount recorded as share assets, liabilities capital issued plus any and reserves, it is additional consideration in the necessary to form of cash or other assets exchange the and the amount recorded for voting ordinary the share capital acquired shares of all should be adjusted against enterprises party to equity; and the business • costs of the combination combination. The should be expensed when pooling of interests incurred. method does not recognize any positive or negative goodwill.

Group Not specified. Not specified Not specified. Not specified. Comparable to Not specified. Not specified. Comparable to Not specified. Not defined. Not specified. Comparable to IAS Not specified. No regulation. No SAS, use IAS. reconstructi IAS. IAS ons

Acquisition A business combination in Comparable to Comparable to Not specified. Comparable to No similar Comparable to IAS Not specified. Comparable to Not defined. Comparable to Comparable to IAS Not specified. Not specified but (SAS 8.12) which one of the enterprises IAS. IAS. IAS. definition exists. (EASB, Business IAS. IAS. from the common Comparable to IAS obtains control over the net Acquisition of net Combinations). practice it is the and additionally, assets and operations of assets regulated same definition. the result must be Definition another enterprise in exchange separately from cessation of for the transfer of assets, acquisition of preparation of insurance of a liability or issue of shares. separate financial equity. statements. As mentioned above Czech legislation does not distinguish between merger and acquisition accounting. However, the rules specified in Czech legislation are closer to application of acquisition accounting.

Application Use of purchase method of Not specified Comparable to Not applicable. Comparable to Acquisition of net Comparable to IAS Comparable to IAS Comparable to Not defined. Comparable to Comparable to IAS Not specified. Not specified (8.12) Same as accounting: IAS. IAS. assets: (EASB Business IAS. IAS. anywhere but from IAS. Combinations). the common • incorporate into the income Basically the same LYFS, LR FM practice it is the statement the results of the as under IAS. regulations as of same treatment. acquiree from the date of 17.01.99 acquisition; and Acquisition of shares • recognize in the balance (consolidated sheet the assets and liabilities financial

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of the acquiree and any statements): goodwill or negative goodwill arising. Actual date of acquisition is not The date of acquisition is the important. Rather date on which control of the net the date (usually assets and operations of the 1st of January) of acquiree is effectively the first year of transferred to the acquirer. consolidation compilation is deemed to be the date of acquisition. From that date the results of acquiree are incorporated into consolidated income statement and its assets and liabilities recognized in consolidated balance sheet together with any goodwill or negative goodwill arising as at that date.

Mergers:

Actual date of acquisition is not usually the critical one for mergers. Rather the date a merger is registered by commercial register is deemed as the date of acquisition. Similar rules as for above are valid then.

Recognition Individual assets and liabilities to Not specified Comparable to Not specified. Comparable to Not specified. Comparable to IAS Comparable to IAS Comparable to Not defined. Individual assets Comparable to IAS Not specified. No definition. No SAS, use IAS. of assets be recognized separately as at IAS. IAS. (EASB, Business IAS. and liabilities and the date of acquisition when: Combinations). recognized in the liabilities financial • it is probable that any statements of the

associated future economic acquirer at the benefits will flow to or from the date of acquisition. acquirer; and The assets and • their cost/fair value can be liabilities are measured reliably. measured at their market values as Benchmark treatment - the at the date of assets and liabilities are acquisition with the measured at the aggregate of: minority interest • the fair value of the being stated at identifiable assets and their proportion of liabilities acquired to the the fair values of extent of the acquirer’s the assets and interest obtained; and liabilities. Assets and • the minority’s proportion of liabilities can be the pre-acquisition carrying measured at their amounts of the assets and pre-acquisition liabilities. carrying amounts, Allowed alternative - the assets if the difference and liabilities may be measured between pre- at their fair values as at the date acquisition of acquisition with the minority carrying amounts interest being stated at their and market values proportion of the fair values of is not material. the assets and liabilities.

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Treatment Each transaction is treated Not specified Comparable to Not specified. Comparable to Not specified. Comparable to Not specified Not specified. Not defined. Comparable to Comparable to Not specified. No regulation. No SAS, use IAS. of separately for the purpose of IAS. IAS. IAS (EASB, IAS. IAS successive determining the fair values of Business share the assets/liabilities acquired Combinations). purchases and the amount of goodwill arising on that transaction - comparing each investment with the percentage of the fair values of the assets and liabilities acquired at each step. If the assets and liabilities are restated to fair values at the time of each purchase, adjustments relating to the previously held interests are accounted for as a revaluation.

Detailed Fair value of assets/liabilities Not specified Guidelines are Not specified. Comparable to Acquisition of net Comparable to Comparable to Not Specified Not defined. Market value Not specified Not specified. Not specified. No SAS, use IAS. rules for determined by reference to provided for the IAS. assets: IAS (EASB, IAS instead of fair the their intended use by the determination of Business value. determinati acquirer. fair values for Combinations). Fair value is to be on of fair specific No guidelines determined by values Guidelines are provided for the categories of provided for the independent determination of fair values for asset and liability. determination of expert. specific categories of asset market values. Revaluation is and liability. possible under When an asset or business certain conditions segment of the acquiree is to only. Net book be disposed of, this is taken value of into consideration in assets/liabilities is determining fair value. often applicable as the only Note: IAS 22 (Revised 1998) practicable which is effective for periods valuation. beginning on or after July 1, 1999 amends the detailed rules for the determination of Acquisition of fair values. In particular ‘fair shares: value’ will no longer be determined specifically by Fair value issue is reference to the intended use not covered at all by the acquirer and liabilities when compiling arising from the acquirer’s consolidated intentions should generally not financial be recognized. Stringent statements. conditions are imposed on the recognition of provisions that were not liabilities of the Mergers: acquiree at the date of acquisition. It is possible to revalue assets

within merger (such a merger does not necessarily constitute a change in existing group and as such might be quite formal). However, in reality this possibility is not usually exercised and assets/liabilities are valued at net book value instead.

Subsequent Carrying amounts should be Not specified. Comparable to Not specified. Comparable to Only applying the Comparable to Comparable to Comparable to Not defined. Not specified. Comparable to Not specified. No regulation. No SAS, use IAS. identificatio adjusted when additional IAS. IAS. prudence IAS (EASB, IAS IAS. IAS n of evidence becomes available to principle permits Business changes in assist with the estimation of subsequent Combinations). value of the fair value of assets and decrease of

68 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 22) Republic Macedonia value of the fair value of assets and decrease of assets and liabilities at the date of carrying amounts. liabilities acquisition. Subsequent increase of Goodwill should also be carrying amounts adjusted if the adjustment is is not permitted. made by the end of the first annual accounting period commencing after the acquisition (providing that it is probable that the amount of the adjustment will be recovered from the expected future economic benefits); otherwise the adjustment should be treated as income or expense.

Cost of The cost of the acquisition is Not specified. Comparable to Not specified. Comparable to The cost of the Comparable to Comparable to Comparable to Not defined. Not specified. Comparable to There is nothing No regulation but No SAS, use IAS. acquisition the amount of cash paid and IAS. IAS. acquisition is the IAS (EASB, IAS IAS. IAS in the RAS from common the fair value of the other amount of cash Business equivalent to this practice it is the consideration given by the paid and the net Combinations). IAS. same. acquirer, plus any costs book value of the directly attributable to the other No regulation. acquisition. consideration given by the Contingent consideration acquirer without should be included in the cost any costs of the acquisition at the date of attributable to the

the acquisition if payment of acquisition. the amount is probable and it can be measured reliably. The cost of acquisition should be adjusted when a relevant contingency is resolved. No regulation.

When settlement of the consideration is deferred, the cost is the present value of such consideration and not the nominal amount.

Goodwill Capitalized and amortized over Not specified. Capitalized and Not specified. Comparable to Acquisition of net Capitalized and Comparable to Capitalized and Not defined. Where goodwill is Comparable to Not specified. Two ways of (SAS 2.16) its useful life, a period that amortized over its IAS. assets: amortized over its IAS amortized over it’s recognized, IAS treating goodwill Positive goodwill

should not usually exceed five useful life, a useful life, using useful life (revised amortization must exist, none of is the amount by years. Amortization will period that should the straight-line be on a straight- which defined as which the costs of Goodwill acquired in 26.11.96). normally be on a straight-line not usually method, not line basis over a benchmark: purchase of an from others Linear method basis. exceed 20 years. exceeding 5 years period that should acquisition through should be used. (EAL §33). not exceed 5 exceed the fair acquisitions must (b) Capitalized A longer amortization period is Amortization will years. value of the net be recorded as an LYFS, FMR as of and permitted when the goodwill is normally be on a identifiable assets asset and 17.01.96. amortized so clearly related to an asset straight-line basis. acquired, amortized over its that it can reasonably be adjusted by the (preferably useful life, expected to benefit the liabilities of the straight-line) to the useful acquirer over the useful life of acquired earnings over its life is limited that asset. In any case, the enterprise. amortization cannot exceed 20 estimated life, to the 5 years. which cannot years. exceed 15 years. Amortizatio Treatment is the The unamortized balance Goodwill cannot n will be on disclosure in the should be reviewed at each be written off a scheduled F/S as an int. period end and written off to against basis non-current asset the extent that it is no longer stockholders’ (method is to be amortized in probable of being recovered. A equity nor not exactly 5 years. Negative write-down should not be reduced to a defined). goodwill is reversed in a subsequent nominal amount classified as a period. immediately after long-term (c) Debited acquisition. provision also to directly to Note: IAS 22 (Revised 1998) be amortized in 5 equity with does not refer to an years. expectation of the useful life of Acquisition of retained goodwill as being 5 years or shares earnings less, but specifies a rebuttable (consolidated and other presumption that the useful of statements only): capital life of goodwill will not exceed funds. 20 years. Goodwill is calculated as a Goodwill is

difference presented in between cost of intangibles. the investment

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the investment and equity of the No regulation on daughter subsequent company as at review of goodwill the first year of for impairment. consolidation. Any such goodwill is amortized over 5 years.

Specific review is not required for goodwill at each period end.

Negative Benchmark treatment - to Not specified Negative goodwill Not specified. Comparable to Not specified Comparable to Not specified. Comparable to Not defined. Treated as Comparable to Not specified. Negative goodwill (SAS 10.5) goodwill eliminate it by reducing the fair should be treated IAS. explicitly - similar IAS (EASB, IAS Benchmark deferred income IAS is presented as Negative goodwill values of non-monetary assets as deferred approach as to Business treatment. No and amortized to special category may arise on acquired on a proportionate income and goodwill is usually Combinations). alternative the profit and loss out of equity and acquisition of

basis. Any remainder is treated should be applied. treatment account over a liabilities. another enterprise as deferred income and recognized as allowed. period not if the cost of the Allowed amortized to the profit and loss income over a exceeding five acquisition is alternative It is possible to account over a period normally period not years. lower than the treatment shall FMR as of amortize negative not exceeding five years. exceeding 20 aggregate fair not be applied. 17.01.96. Allowed goodwill if there years from the value of alternative were expectations Allowed alternative date of the identifiable assets treatment shall of losses which treatment - to regard the acquisition. and liabilities not be applied were fulfilled. It is whole amount as deferred acquired. possible to off-set income and to recognize it in Negative goodwill Negative goodwill positive and income over a similar period. will be deferred should be negative goodwill and matched with recognized in Note: Under IAS 22 (Revised giving appropriate any expected future revenues over a 1998) negative goodwill be disclosure in losses or expenses period of five deferred and matched with any footnotes to which it relates. years. expected future losses or To the extent that it expenses to which it relates. does not relate to To the extent that it does not identifiable future relate to identifiable future losses or expenses, losses or expenses, it should it should be be recognized as income on a recognized as systematic basis over the income on a remaining useful lives of the systematic basis depreciable assets acquired over the remaining and, to the extent that it useful lives of the exceed the fair values of such depreciable assets assets, it should be recognized acquired and, to the as income immediately. extent that it exceed the fair values of

such assets, it should be recognized as income immediately.

Treatment Not specified. Not specified Not specified. Not specified. Comparable to Goodwill forms Forms part of the Comparable to Not specified. Not defined. The unamortized Forms part of the Not specified. It is possible to No SAS, use IAS. of goodwill IAS. part of the gain/loss on IAS balance of the gain/loss on transfer it to the upon gain/loss on disposal (EASB, goodwill should disposal other capital disposal of disposal of Business be included in funds if it acquired acquired Combinations). determination of represents from enterprises. enterprise. the gain or loss selling company on disposal. related to this negative goodwill.

For positive goodwill treatment is not specified.

Reverse Where an entity (the issuer) Not specified. Not specified. Not specified. Comparable to Not specified. Comparable to Comparable to Not specified. Not defined. Not specified. Comparable to Not specified. No regulation. No SAS, use IAS. acquisition acquires another entity (the IAS. IAS if the IAS. IAS s target) such that control of the combiner is

combined enterprise passes to identifiable

the holders of the shares (EASB, Business issued as consideration (i.e. to Combinations). the shareholders of the target), then the issuer may be

deemed to have been

acquired by the target and the purchase method of accounting be applied to the assets and liabilities of the

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issuer.

Disclosure For all business combinations: Not specified. Comparable to Not specified. Comparable to Facts on business Comparable to Comparable to For all business Not defined. In respect of Comparable to Not specified. For all business No SAS, use IAS. IAS. IAS. combination IAS (EASB, IAS combinations: goodwill: IAS acquisitions: should be Business • names and details of disclosed in Notes Combinations). combining enterprises; • names and • accounting • names and to Financial details of treatment and details of statements based • method of accounting; combining period of combining on general enterprises; amortization, enterprises; • effective date of concept that all combination; and significant • method of • a reconciliation • method of information • accounting; between accounting; any operations which the should be opening and enterprise has decided to disclosed. • effective date of closing balances • effective date of dispose of. However, specific combination; on goodwill. combination; requirements are and and For uniting of interests, not listed. • Gain or loss on disclose: • any operations disposal of • any operations which the which the Practically it may acquired enterprise has enterprise has • details of shares issued and be assumed that enterprises and decided to decided to the percentage of each similar information net assets of dispose of. dispose of. enterprise’s voting shares as per IAS would disposed exchanged; enterprises. be disclosed. And all significant Uniting of • assets/liabilities contributed events from the interests is not by each enterprise; end of prior covered by the financial year. regulations. • sales revenue, other

operating revenues, For acquisitions, extraordinary items and net disclose: income of each enterprise prior to the combination date. • percentage of voting shares For acquisitions, disclose: acquired;

• percentage of voting shares acquired; In respect of goodwill, disclose: • cost of acquisition and description of consideration paid/contingently payable; • accounting and treatment and period of • nature and amount of amortization provisions for restructuring (positive and and other plant closure negative); expenses arising as a result of the acquisition. • information on off-set of Subsequent adjustments to positive and fair values should be disclosed negative and explained. goodwill.

For business combinations effected after the balance sheet date, the same disclosures should be made, if practicable.

In respect of goodwill, disclose:

• accounting treatment and period of amortization (positive and negative);

• where the amortization

period exceeds 5 years, justification of the period adopted;

• when amortization is not straight-line, the basis used and justification for its use; and • a reconciliation between

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opening and closing balances on goodwill.

72 Comparison of International Accounting Standards and Lithuanian Accounting Policies

16. Borrowing Costs Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 23) Republic Macedonia

Meaning of Borrowing costs include: Not specified Not specified. Borrowing costs Comparable to Borrowing costs Not specified. Borrowing costs Comparable to Not defined. Not defined but Comparable to Not specified. No exact Borrowing costs ‘borrowing include: IAS. include: include: IAS. generally refers IAS definition of include: costs’ to: borrowing costs, • interest on bank overdrafts but as examples and borrowings; • interest on bank • Interest due to • interest on bank • interest on bank named and as overdrafts and banks overdrafts and • interest overdrafts and practice used in • amortization of discounts or borrowings; borrowings; expenses borrowings general- premiums on borrowings; • Interest on late (including (Short-term borrowing costs • finance charges payments • The fee for any amortization of borrowings – • include: amortization of ancillary on finance under a credit bank guarantee discounts); real and costs incurred in the leases; agreement paid prior to revaluation arrangement of borrowings; drawdown of a • related ancillary • interest on bank interest and • amortization of • Obligation to • credit or loan charges overdrafts and exchange rate finance charges on finance discounts or pay interest in and prescribed incurred in the leases; and borrowings; differences premiums on the case of loan as a arrangement of could be borrowings; or financial • • exchange differences on prerequisite to borrowings; and discounts or considered transactions the credit or premiums on foreign currency borrowings • exchange • borrowing costs. (including loan; exchange borrowings; SAS 17.14. where they are regarded as differences on discounting of differences an adjustment to interest foreign • • Long-term securities) The fee for arising on ancillary costs borrowings - costs. currency handling and foreign incurred in the borrowings • Foreign The portion of disbursement currency arrangement of interest as well where they are exchange rate commission borrowings. borrowings; regarded as an differences on as foreign paid on the exchange adjustment to foreign drawdown of a • exchange interest costs. currency differences on gains/losses credit or loan as associated with borrowings specified in the foreign currency borrowings the revaluation • contract, and of received Financial costs the commitment incurred in the loans and commission credits should arrangement of charged up to borrowings be accounted for the drawdown as an item of (bank charges, of the credit; insurance, bank utilization of the collateral) • The fee for revaluation notarization of results as

the contract of defined in SAS a credit or loan; 17.13.); • • The interest amortization of incurred on a discounts or credit or loan premiums on up to the borrowings; putting into • finance charges operation or on finance delivery of the leases; and asset to the warehouse; • exchange rate differences on

foreign currency borrowings where they are regarded as an adjustment to interest costs.

Treatment Benchmark treatment - Comparable to Not specified. Expense all Comparable to Not specified. Comparable to The borrowing Comparable to Not defined. Borrowing costs Comparable to As per IAS. Treatment is to (SAS 17.9.) Same of expense all borrowing costs in IAS borrowing costs in IAS. IAS. cost can be IAS. including interest, IAS. expense all as IAS. borrowing the period in which they are the period in capitalized in creditors’ borrowing costs in The same Allowed costs incurred. which they are case of commissions and the period in The allowed treatment. Similar treatment Allowed alternative (SAS 17.9) Real incurred, except constructions. exchange which they are alternative Borrowing costs if constructing alternative treatment - interests are the cases when differences incurred (interest, Allowed alternative treatment - treatment is not in relation to the tangible assets for treatment - if borrowing costs in included in borrowing costs related to the foreign exchange borrowing costs in relation to specified. acquisition of own use (EASB, If the above constructing relation to the financial relate to the acquisition or differences, the acquisition, construction qualifying assets Balance Sheet mentioned tangible assets for acquisition, expenses at acquisition, construction of discounts, and production of qualifying should be Accounts). borrowing costs own use. construction and amounts construction and fixed assets premiums and assets should be capitalized. capitalized. can be tied to production of computed in the production of incurred in the ancillary cost. No specific qualifying assets relevant period, qualifying assets. period of their amortization for construction on may be unless they are Where the allowed alternative The latter type of construction discounts, reasonable capitalized included in is adopted, that treatment costs should be should be premiums and certainty they property, plant should be applied consistently capitalized to capitalized. ancillary cost is have to be and equipment or to all borrowing costs incurred these assets. specifically capitalized. intangible fixed for the acquisition, allowed by the Not qualifying assets. construction and production of regulation) except borrowing costs qualifying assets. [SIC 2] interest and should be foreign exchange (SAS 1.4) Self- expensed in the differences constructed period in which (realized - related tangible fixed they are incurred to payments) in assets include on an accrual relation to the real interest costs basis

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basis. acquisition, relating to construction and borrowings. production of

tangible fixed (SAS 2.7) The assets. costs of purchase should not include expenses that have not contributed to the development of the intangible fixed assets, or that the market does not recognize, but they may include the cost of real interest on loans obtained to develop the services prior to the amortization.

(SAS 2.17) Among costs of organization is included cost of Interest on loans obtained to finance the stage of operations, incurred prior to commencement of operations of the enterprise.

Definition A qualifying asset is an asset Not specified Not specified. The rules Comparable to A qualifying asset Not specified. There is no such Comparable to Note defined. Not specified – in Not specified Not specified. No regulation Same as IAS. of that necessarily takes a prescribe a limited IAS. is an asset, which category under IAS. practice assets qualifying substantial period of time to number of the will be in use long HAS. that require assets get ready for its intended use qualifying assets: period. (more one substantial time to or sale. fixed assets, year). get ready for construction in intended use. progress and intangible assets.

Costs Where funds are borrowed Not specified Not specified. Costs eligible for Comparable to Not specified. Comparable to Not specified. Comparable to Not defined. Generally interest, Comparable to Not specified. Interest and Same as IAS, eligible for specifically, costs eligible for capitalization are IAS. IAS, if IAS. creditors’ IAS. foreign exchange except for the capitalizati capitalization are the actual the actual capitalization is commissions and differences reduction of on costs less any income earned borrowing costs allowed (EASB. exchange (realized - related income earned on on the temporary investment incurred. Balance Sheet differences on to payments) in temporary of such borrowings. Accounts). loans, borrowings, relation to the investment. prepayments and acquisition, Where funds are part of a other liabilities construction and general pool, the eligible incurred in the production of

amount is determined by period of an asset tangible fixed applying a capitalization rate construction. assets should be to the expenditure on that capitalized. asset. The capitalization rate In practice: will be the weighted average Income earned on of the borrowing costs • when financing temporary applicable to the general pool. is obtained investment of specifically – borrowings should Borrowing costs capitalized in actual costs be recorded via a period should not exceed incurred; P&L. the borrowing costs incurred in that period. • when fund For pool of assets constitutes part there is no of a general pool specific – weighted regulation, but average rate practice for applicable to allocation of the general borrowing cost funding pool. into acquisition price for general pool of assets can be similar to that used in IAS

Commence Commence capitalization Not specified Not specified. Commence Comparable to Commence Commence Comparable to Comparable to Interest on Commence Comparable to Not specified. Commence Same as IAS. ment of when: capitalization IAS. capitalization capitalization if IAS IAS. borrowed capitalization at IAS. capitalization capitalizati when when: the borrowing amounts intended the moment the when:

74 Comparison of International Accounting Standards and Lithuanian Accounting Policies

Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 23) Republic Macedonia on expenditures are costs occur within for purchase or construction of an • expenditures are being being incurred. • Expenditures construction production of asset is started. • expenditures are incurred; Thus, the are being period (EASB, long-term assets, being incurred commencement incurred. Balance Sheet until use of the or • borrowing costs are being depends on what • Accounts). assets shall be • incurred; and related Commencement included in the borrowing costs accounting policy of acquisition of cost of the long- are being • activities that are necessary qualifying asset incurred, and to prepare the asset for its is chosen by term assets and intended use or sale are in enterprise, either • Commencement amortized in the • activities that are progress (may include an accrual or of interest paid. course of use of necessary to some activities prior to cash basis. the assets. This prepare the fact shall be commencement of physical asset for its production). mentioned in the intended use or Notes relating to sale are started the Annual and in progress. Accounts.

Suspension Suspend during periods in Not specified Not specified. Not specified. Comparable to Not specified. Comparable to Not specified. Comparable to Not defined. Not specified. Comparable to Not specified. No regulation for (SAS 1.4) Same of which active development is IAS. IAS (EASB, IAS. IAS. suspension. It is as IAS. capitalizati interrupted. Normally not Balance Sheet mentioned that on suspended during a period Accounts). the cost for when substantial technical or securing the administrative work is being assets and carried out or when a conservation temporary delay is a works can be necessary part of the process capitalized of getting an asset ready for its intended use or sale.

Cessation Capitalization should cease Not specified Not specified. Capitalize until Comparable to Capitalization Cease Not specified. Comparable to Note defined. Cease Cease Not specified. Capitalization Same as IAS. of when substantially all of the fixed assets are IAS. should cease capitalization at IAS. capitalization at capitalization at should cease in capitalizati activities necessary to prepare put to operation. when the asset is the end of the the moment the the end of the the moment of on the asset for its intended use Then to put in use. construction construction is construction getting an asset or sale are complete. If only expenses. period and when brought into use period ready for its minor modifications are carrying amount and transferred to intended use or outstanding, this indicates that equals fixed assets sale. substantially all of the recoverable (when it is activities are complete. amount (EASB, complete and Balance Sheet ready to use). Where construction is Accounts). completed in stages, which can be used while construction of the other parts continues, capitalization should cease when substantially all of the activities necessary to prepare that part for its intended use or sale are complete.

Disclosure Disclose: Not specified Not specified. Not specified. Comparable to Disclose: Comparable to The accounting Comparable to Not defined. Not specified Comparable to Not specified Disclose: Same as IAS. IAS. IAS (EAL policy concerning IAS. IAS. • the accounting policy • the way of Appendix 3, capitalization has • the accounting adopted; valuation EASB Balance to be stated in the policy adopted; including • Sheet Accounts). supplementary • the amount capitalized during description of notes. purpose of the the period; and assessment of loans and interest related • acquisition price the capitalization rate used to of long term to each loan determine the borrowing asset. costs eligible for capitalization.

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17. Related Party Disclosures Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 24) Republic Macedonia

Definition Parties are considered to be Comparable to Comparable to No statutory rules Comparable to The definition is Comparable to Comparable to IAS Comparable to Not defined. Related parties Not specified There is nothing No such definition (Preface to SAS, of related related if one party has the IAS IAS. requiring related IAS. different for IAS (EASB Equity IAS. are defined in the RAS exists. Related point 9,) The party ability to control the other party party disclosures various purposes. Method / indirectly through equivalent to this parties are just parent company or to exercise significant exist. Consolidated the definition of a IAS. described via should have: an influence over the other party Accounts). parent company examples as absolute majority in making financial and included in the described below. of the votes of operating decisions. ‘Act’, and shareholders or definitions of members of control and shareholders significant assembly in the influence provided subsidiary; in the accompanying The right to regulations. appoint the majority of More precise members of the definition in board of directors, regulations for management listed companies. board or supervisory board in the subsidiary, and is also owner of shares, permanent deposits or similar in the subsidiary;

A majority control in the subsidiary exercised as specified in the paragraph above without having shares, permanent deposits or similar in the subsidiary;

The power to cast more than one half of the votes of shareholders or members of shareholders assembly by virtue of an agreement with other investors.

Application Restricted to the following Comparable to Comparable to Not specified. Comparable to Comparable to Comparable to Comparable to IAS Comparable to Not defined. Restricted to the Not specified Not specified. Related party No SAS covers of the relationships: IAS IAS. IAS. IAS. IAS (EASB, Cost IAS and in following means this area. Also standard Principles – addition: relationships: see definition of • entities that control, or are Equity Method – • entities, who related parties for controlled by, or are under Consolidated client, supplier • parent directly or tax purposes in common control with, the Accounts). or other person companies, indirectly the Law on tax on reporting entity (e.g. holding upon which the subsidiaries through one or profit. companies, subsidiaries and company is and associates, more levels of fellow subsidiaries); economically control interest very • members of toward particular • associates; dependent. management entity or its board and • mother individuals owning an supervisory company interest in the reporting board and their enterprise that gives close family • joint ventures significant influence over it, members and associates and close family members of (clearly any such individual; defined) and • individuals with direct or indirect • persons key management personnel, otherwise significant and their close family connected by influence though members; and relationship of their voting • guardianship, rights and their enterprises in which a relatives substantial interest is owned adoption or warship; by any of the individuals • key included above, or over • enterprises in management which such an individual is which • able to exercise significant individuals entities in which influence. included above individuals mentioned in are significant shareholders or above points hditl

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partners. have directly or indirectly Wider and more significant precise interest or description of significant relevant influence relationships included in regulations for public companies.

Disclosures If there have been transactions Comparable to If there have been Not specified. Comparable to Not specified. Comparable to Comparable to Comparable to Not defined. Information (but Not specified Not specified. If there have been Same as IAS. required in between related parties, IAS transactions IAS. Usually the IAS (EASB Equity IAS IAS. no guidance is transactions respect of disclose: between related following is Method - provided as to the between related transaction parties, disclose: disclosed: Consolidated type of parties, disclose: s • the nature of the Accounts). information) about relationship; • the types of • related party transactions with • the nature of the transactions; receivables and subsidiaries and relationship; • the types of transactions; and payables in the associates • and financial excluded from the types of • the elements of statement transactions; • the elements of the consolidation, the transactions individuals and and transactions necessary for necessary for • provided loans an understanding of the enterprises • the elements of an and borrowings specified above financial statements (i.e. an understanding to the related the transactions indication of volume, should be necessary for of the financial parties in cash disclosed. outstanding items, pricing statements (an flow. an policies). indication of Additionally understanding volume, of the financial disclosure of outstanding emoluments statements (i.e. balances, (including profit an indication of pricing share) paid and volume, policies). loans made to outstanding members of items, pricing management policies). board and supervisory board is required.

In individual financial statements of a parent company disclose in respect of subsidiaries and associates:

• amount of long term investments in those companies;

• accounts receivable and payable;

• costs and revenues and other data necessary for drawing up consolidated financial statements.

Aggregatio Items of a similar nature may Comparable to Not specified. Not specified. Comparable to Not specified. Not specified. Not specified. Comparable to Not defined. Not specified. Not specified Not specified. No regulation. Same as IAS. n be disclosed in aggregate IAS IAS. IAS. except when separate disclosure is necessary for an understanding of the effects of related party transactions on the financial statements of the reporting enterprise.

Disclosure Related party relationships Not specified Not specified. Not specified. Comparable to The accounting Not specified. Not specified. Comparable to Not defined. For all Not specified Not specified. Related party Same as IAS. of control where control exists should be IAS. unit shall disclose IAS. subsidiaries and relationships disclosed, even where there the name and associates should where control have been no transactions. registered office be disclosed: exists should be of each business disclosed, even company and co- • % of shares where there have

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company and co- ownership; where there have operative in been no whose registered • % of effective transactions. capital it has more involvement in than a 20 % management; proportionate • share and profit or loss for specifies its the last proportionate accounting share in each period. such enterprise.

Exclusions The following are deemed not Not specified The following are Not specified. Comparable to Not specified. Not specified. Not specified. Comparable to Not defined. Not specified. Not specified Not specified. The following are Same as IAS. from to be related: deemed not to be IAS. IAS deemed not to be definition of related: related: related • two companies simply party because they have a • providers of • two companies director in common (but finance, public simply because need to consider influence utilities, they have a on both companies); government director in departments common (but • providers of finance, trade and agencies in need to consider unions, public utilities, the course of influence on government departments their normal both and agencies in the course dealings with companies); of their normal dealings with an enterprise; an enterprise; and • providers of • a single finance, trade • a single customer, supplier, customer, unions, public franchiser, distributor or supplier, utilities, general agent with whom an franchiser, government enterprise transacts a distributor or departments significant volume of general agent and agencies in business merely by virtue of with whom an the course of the resulting economic enterprise their normal dependence. transacts a dealings with an significant enterprise; and

volume of business • a single merely by virtue customer, of the resulting supplier, economic franchiser, dependence; distributor or and general agent with whom an • banks when enterprise they act only as transacts a providers of significant finance. volume of business merely by virtue of the resulting economic dependence.

Exemptions No disclosure required: Comparable to No disclosure Not specified. Comparable to Not specified. Not specified. The receivable Not specified. Not defined. No disclosure Not specified There is nothing No regulation. Same as IAS. IAS required: IAS. and payable required in in the RAS • in consolidated financial relating to related consolidated equivalent to this statements in respect of • in consolidated parties have to be financial IAS. intra-group transactions; financial reclassified into a statements in statements in • separate category respect of intra in parent financial respect of intra- in the balance group statements, where they are group sheet. transactions with made available or published transactions. subsidiaries and with consolidated financial associates

statements; subject to • in financial statements of a consolidation. wholly owned subsidiary if its parent is incorporated in the same country and provides consolidated financial statements in that country; and

• in financial statements of state-controlled enterprises of transactions with other state-controlled enterprises.

78 Comparison of International Accounting Standards and Lithuanian Accounting Policies

18. Accounting for Investments Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 25) Republic Macedonia

Classificati A current investment is an Comparable to Comparable to A current Comparable to Comparable to Comparable to The same Comparable to Comparable to Not specified – in Comparable to A “short term A current (SAS 3.19) Short- on of investment that is by nature IAS IAS (Accounting investment is an IAS. IAS. IAS (EASB treatment under IAS. IAS. practice IAS investment” is an investment is an term investment is investment readily realizable and Law). investment that is Balance Sheet HAS. The comparable to investment investment that is an investment s intended to be held for not by nature readily Accounts). classification has IAS. acquired in order by nature readily intended to be more than one year. realizable and to be determined to obtain a profit in realizable and held for not more intended to be by the company. If a short-term intended to be than one year. A long-term investment is an held for not more this classification period. held for not more Long-term investment other than a than one year. has changed than one year. investment is an current investment. since the previous A “long term investment A long-term year, it has to be investment” is an A long-term intended to be IAS acknowledges the role investment is an stated in the investment investment is an held for more than of management’s intentions investment other supplementary acquired in order investment other one year and/or and states that “the fact that than a current notes. to control or in than a current an indefinite a marketable investment has investment. order to have a investment. period. been retained for a significant considerable period does influence over the No other (SAS 6.4) Portion not preclude its classification issuer or in order regulation. of long-term as current”. to keep them for investments long periods of repayable within

time. one year following the balance sheet date should also be recorded as a short-term investments.

(SAS 3.20) Long- term investments are investments in other enterprises intended to be held for a number of years to generate financial revenues and other benefits and/or to maintain as well as increase the value of the investments.

Requireme Where a distinction is made Comparable to Current The classification Comparable to Investments are Investments are Same under HAS. Classification of Not defined. The required It is required that Investments are There is not a Same as IAS. nt to between current assets and IAS investments are is required. IAS. required to be split required to be split investments is format of financial investments are required to be split general definition classify long-term assets - presented as into current and into current and required by LYFS. statements spilt into current into “short term” long-term and investments should be current assets and long-term long-term stipulates a and long-term and “long-term” short-tern assets

presented accordingly. long-term investments. By investments (EAL distinction investments. investments. or liabilities.

investments – as long-term financial §27). between fixed Same as IAS. Even where no distinction is Not specified fixed assets. investments is assets and current made for presentation required division assets. purposes, it is still required according for measurement purposes. ownership Current percentage: investments and long-term • Shares with investments controlling should be influence > 50 separately disclosed under • Shares with relevant headings. substantial influence > 20

• Other securities and ownership interests.

Carrying Investments classified as Comparable to Investments For dealing Comparable to Securities and Shares and other If the stock Comparable to Not defined. Current Shares and other In the RAS, all Investments Same as IAS. amount of current assets, should be IAS classified as securities IAS. ownership current exchange market IAS. investments other current investments are classified as current carried either at market current assets classified as interests are investments are price of securities than debt investments are revalued to lower current assets, (SAS 6.5) Initially investment value, or at the lower of cost should be carried current assets, valued at their reported at the listed on the stock LYFS 32(1). notes/securities reported at cost of cost or “value of should be carried short-term s and market value. The at market value if cost includes purchase price lower of cost or exchange and should be carried plus any the item at the lower of investments are lower of cost and market traded on stock acquisition price without combined market value. entered among at the lower of revaluation. considered as at cost and market carried at the cost value may be determined exchange. plus amortized expenditures. If current assets is cost (acquisition balance sheet value. of invested either on a portfolio or on an Revaluation is discounts. there are Current permanently (for a price or purchase date”. This “value monetary or other individual investment basis. effected monthly. temporary investments in period of at least price) and net considered as at assets. Debt securities difference marketable one year realizable value balance sheet (SAS 6.6) Short- classified as between securities quoted preceding the determined on an date” is not term investments current assets accounting and on the stock preparation date individual basis defined in the

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current assets accounting and on the stock preparation date individual basis. defined in the in securities with a should be market value the exchanges of of the balance same way as the market value on recorded at par provision should Organization of sheet) lower than Debt IAS “market the balance sheet value. be created to Securities their book value, notes/securities value”. When date lower than Discounts/interest make the Commissions such securities should originally “value considered their costs of s on the debt accounting value (IOSCO) member shall be evaluated be carried at cost as at balance purchase should securities are more realistic. states, are on the basis of the and then at selling sheet date” is be carried at their amortized/accrued reported at market last published prices ruling at the lower than cost market value, and to interest income By investment value. stock exchange balance sheet provisions are the difference using the straight- funds the average rate of date. suggested to be between the two line method over securities are the year. made amounts should the period to valued at market be recorded as maturity of the price. The Investments financial related securities. difference of representing expenses. market price by ownership shares However, an Equity securities closing of books is in economic increase in the either classified as entered to the associations shall market value short or long term equity. be evaluated at above the original investments are the value defined costs of purchase accounted for at in the Articles of of the securities in cost. Association no way influences (Statutes), or, in their valuation. the case of The decline in the purchase, at the carrying amount purchase price, or may be at the book value determined either less the loss in on an item-by- value already item basis or on a accounted for, if portfolio basis. the market assessment of the economic association does not decrease on a permanent basis, for a period of at least one year preceding the preparation date of the balance-sheet;

the amount invested in the economic association is expected to be recovered upon the termination of the economic association;

the proportional part of the value of the economic association's equity corresponding to the face value of the investment does not decrease below the book value of the investment.

Carrying Investments classified as Long-term Investments Carrying amount Comparable to Securities and Long-term Securities with a Comparable to Long term Long-term Long-term Long-term Investments (SAS 3.6) Long- amount of long-term assets should be investments are classified as long- of long-term IAS. ownership investments, other maturity of more IAS financial assets investments other investments are investments are classified as long- term investments long-term carried at: measured at their term are investments is interests are than investments than one year which market than debt carried at cost or carried at cost. term assets of all categories investment historical cost. measured initially defined in the valued at their in subsidiary and shall be evaluated If revaluation value exceeds notes/securities revalued amounts should be carried are carried at the s • cost; or at cost and carried same way as purchase price associate at the actual exist, it should be purchase and should be carried In the RAS at cost less any cost of invested disclosed in the investments can • thereafter at fair carrying amount without combined companies, are purchase price or production costs at cost less identified decrease monetary or other re-valued amounts; or value. of current expenditures. If carried at cost at book value until financial of that said assets provision for not be revalued in value of the assets. statement’s upwards. • investments. there are (EASB Balance the value of such may be re-valued permanent assets. for marketable securities Revaluation is annex. (SAS 3.13) In temporary Sheet Accounts). securities provided such an diminution in Long-term only, the lower of cost and effected as at the Slovenia an

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only, the lower of cost and effected as at the difference permanently, for a increase in value value. investments in Slovenia an market value determined balance sheet between Long-term period of at least LYFS 26., 27.,28., is substantiated subsidiaries and In the RAS, all inflationary on a portfolio basis. date. accounting and investments in one year 29. and of long Long-term debt associate investments are economy is used

market value the subsidiaries and preceding the duration. If such notes/securities companies are revalued to lower where long-term For re-valued investments, a associated should originally of cost or “value of provision should preparation date assets are recorded using investments in policy for the frequency of be created to companies are of the balance necessary to the be carried at cost the equity method the item capital should be re-valuations should be make the recorded using sheet, decreases enterprise to carry and then at selling considered as at revalued on the adopted and an entire accounting value the equity method below the book out its business, prices ruling at the balance sheet basis of a retail category should be re- more real. in the separate value of the they may be re- balance sheet date”. This “value price index, while valued at the same time. accounts of the securities. valued up to the date. considered as at long-term parent (EASB limit of the sum balance sheet investments in

Equity Method). The registered that can be date” is not loans should be value of securities justified by the defined in the revalued only with a maturity of profitability. same way as the when this is more than one IAS “market stipulated in the year shall be value”. When agreement reduced if, for a “value considered between the period of at least as at balance creditor and the one year sheet date” is debtor. The upper preceding the lower than cost, limit of the preparation date provisions are revaluation is the of the balance suggested to be carrying amount sheet, the market made. adjusted on the assessment basis of the retail

thereof is lower price index. When than the the market price registered value. or the new agreed The registered amount expressed value of securities in the new with a maturity of purchasing power more than one of the local year shall be currency does not reduced until they allow for the are shown in the revaluation to be balance sheet at a made, the value principle of the corresponding to lower value the market should be applied, assessment and the prevailing (as revaluation known) at the amount exceeding preparation date the upper limit of the balance should be sheet. recorded as a new long-term

investment.

(SAS 3.14) If the interests on given long-term loans include the amounts relevant to revaluation it is necessary to classify the interests in the real interests portion and the revaluation- related portion of interests. Unless such classification has been made, the entire increase of interests to the amount based on the retail price index is recorded as the revaluation amount.

(SAS 3.15) The increase in carrying amount arising from revaluation of long-term investments and the revalued portion of interests on the long-term investments are

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recorded as a revaluation result (surplus or deficit)

(SAS 3.16) In an inflationary economy the foreign exchange gains or losses are also recorded as a revaluation surplus and/or deficit respectively.

Provision The carrying amount of all As per Albanian Comparable to IAS The statutory rules Comparable to Comparable to Comparable to IAS Not applicable N/A Not justified. Comparable to Comparable to In the RAS, there Provision for (SAS 3.10) Where for long-term investments should Accounting (Accounting Law). do not require IAS. IAS. (EAL §28). under HAS. IAS. IAS. is no judgement temporary decline there is a decline in permanent be reduced to recognize a Policies amounts provisioning for allowed to make a in value the the value of a long- diminution decline (other than a stated as permanent permanent decline reduction is done term investment in value temporary decline) in the provisions, have to diminution in value, in the value of through a the carrying value of the investments, be determined however an entity long-term provision. The amount should be such reduction being separately for each is allowed to create investments. provision should reduced to determined and made for category of tax non-deductible be written back recognize the each investment individually. investment. provisions. when the decline by charging circumstances the financial that led to the expenses account. write-down cease If the value of the to exist and the long-term new investment circumstances are increases again at expected to a later stage, the persist. recognized decline should be offset. For permanent diminution in value no regulation, not common practice, as difference is either considered temporary or asset is not recognized.

Investment Investment properties should Not specified. Investment Investment Comparable to Are accounted for Are accounted for Not applicable Comparable to Not defined. Not specified. Accounted for Not specified. Lands, art works, Investment properties either be accounted for as properties should properties should IAS. as properties in under IAS 16. under HAS. IAS. under IAS 16 art collections and properties should properties in accordance with be accounted for be accounted for accordance with In practice, based precious metals be accounted for IAS 16 or as long-term as long term as properties. Czech accounting on general can be presented only as properties. investments. investments. legislation as regulations, as financial compared to above classified and investments. Other

under IAS 16. treated as fixed properties, even assets. considered as investment properties under IAS, should be treated as standard tangible fixed assets.

Short-term Changes in For current asset As per Albanian For current asset Changes in Comparable to All changes All changes in Not applicable Comparable to Not defined. For current asset Comparable to In RAS, revaluation For current asset investments: carrying investments at market value, Accounting investments at carrying amount IAS. involved of carrying amount under HAS. IAS. investments write- IAS. is by Government investments at amount of movements may be either policies, an market value, of investments are provisions are are treated as offs to net Order only, but it market value (SAS 6.6) Short- investment treated as income/expense adjustment for a movements recognized as treated as income or expense realizable value does not apply to lower than cost, term investments Long-term s or as revaluation decrease in the should be treated income or expense. The (EAL §28). should be charged investments. reduction is in securities with a investments: movements, as long as the value of an as expense. settlement of to profit and loss treated as market value on policy is applied investment, must income/expense. provision is treated account. provision. the balance sheet Long-term consistently. be reflected in the as income. By • an increase to date is lower than investments are P&L and must be Long-term revaluation of be credited to a For long-term For long-term their costs of carried at cost. Long-term investments: presented investments: foreign revaluation investments write- investment under purchase should Impairment losses separately in the investments the surplus; downs due to the principle of be carried at their • an increase to be credited • an increase to and reversals are annexes to the exchange rates permanent conservatism may market value, and to a revaluation surplus, be credited to a reported in net financial differences are diminution in be at equity cost the difference except where it reverses a revaluation income or loss • statements. carried to the a decrease to be value - charged to lower than cost, between the two previous decrease relating surplus, except (EAL §28). balance sheet. treated as an profit and loss reduction is amounts should to the same investment, where it expense. account. treated as be recorded as which was expensed, to reverses a provision. financial which extent it should be previous Changes in For debt expenses. treated as income; and decrease The provision revaluation surplus notes/securities However, an relating to the should be written should be (both current and increase in the same back when the • a decrease to be treated as disclosed in the long-term) effect market value investment, circumstances an expense except where it financial of ongoing above the original which was that led to the reverses a previous statement’s annex. revaluations to costs of purchase expensed, to write-down cease increase which was selling price at of the securities in

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increase which was which extent it statement’s annex. selling price at to exist and the of the securities in credited to the revaluation should be each balance new no way influences surplus, to which extent it treated as sheet date should circumstances are their valuation. should be debited to the income; and be recognized as expected to The decline in the revaluation surplus. income/expense. persist. carrying amount may be • a decrease to be Revaluation of determined either treated as an investment on an item-by- expense except upward is not item or on a where it allowed. portfolio basis. reverses a previous (SAS 6.8) When increase which there is a decline was credited to in the value of a the revaluation short-term surplus, to which investment the extent it should carrying amount be debited to should be reduced the revaluation to recognize the surplus. decline by charging the

financial expenses account.

Long-term investments:

(SAS 3.9) Long- term investments in securities with a market value on the balance sheet date lower than their costs of purchase should be carried at their market value, and the difference between the two amounts should be recorded as financial expenses. However, an increase in market value above the original costs of purchase of the securities in no way influences their valuation. The decline in the carrying amount may be determined either on an item-by- item basis or on a portfolio basis.

(SAS 3.10) When there is a decline in the value of a long-term investment the carrying amount should be reduced to recognize the decline by charging the financial expenses account. If the value of the long- term investment increases again at a later stage, the recognized decline should be offset.

(SAS 3.23) Risks relevant to recovery and decline in

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exchange rates in connection with securities, as well as other risks and uncertainties of long-term investments, are regarded as the principal justifiable reasons for a write-down exceeding the adjustments made for amortization either to claims that have not yet reached maturity or to past due claims arising from the long-term investments.

Disposal of The difference between the Not specified The difference The difference Comparable to Comparable to The FIFO method The difference The difference Not defined. The difference Directed to Disposal proceeds Whole proceeds Same as IAS, investment disposal proceeds and the between the between the IAS. IAS. is used in between the between the between the retained earnings. are recognized as from disposal are except for ‘should s carrying value should be disposal proceeds disposal proceeds determining disposal proceeds disposal proceeds disposal proceeds income and the recognized as be recognized as recognized as income or and the carrying and the carrying Not specified. disposal and the carrying and the carrying and the carrying carrying value of revenue, cost are income or

expense. value should be value should be gains/losses value should be value should be value should be the investments presented and expense from Not specified recognized as recognized as (EASB Balance recognized as recognized as recognized as disposed is expense and any financing.’ If the investment was financial income income or Sheet Accounts). income or income or income or recognized as provisions created previously revalued and an or expense. expense. expense. expense. expense. expense. are cancelled via Not applicable. increase in carrying amount Not specified. revenue specific transferred to a revaluation If the investment account. Revaluation is not reserve, the amount of any was previously allowed under remaining related revalued and an HAS. revaluation surplus may be increase in Not applicable as treated as income or carrying amount revaluation transferred directly to transferred to a upwards is not retained earnings provided revaluation allowed. that the policy is applied reserve, the consistently. amount of any remaining related

revaluation surplus should be treated as income.

Transfers Reclassification of fixed as Not specified Reclassification of No statutory rules Comparable to Not specified. Comparable to Not applicable Comparable to Not defined. Not specified. Comparable to IAS RAS has no Reclassification of Not applicable. of current: fixed as current is in this area exist IAS. IAS (EASB under HAS. IAS. concept of long-term investment made at the due to the fact Balance Sheet reclassifying long investment as • if current investments are Same as IAS. s carrying amount that there are no Accounts). term investments current and vice carried at the lower of cost of the long-term differences in as current versa is done at and market value, transfer investment. accounting for investments. carrying value of at the lower of cost and short and long- investment. Any carrying amount (if the term investments. provision created Current investment was previously will need to be investments revalued any remaining transferred as reclassified as related revaluation well. reserve should be long-term - reversed on transfer); or transfer at the lower of cost and • if current investments are market value or at carried at market value, market value if transfer at carrying previously carried amount (if changes in at that value. market value are included in income, any remaining relevant revaluation surplus should be transferred to income).

Current investments reclassified as long-term - transfer at the lower of cost and market value or at market value if previously carried at that value.

Disclosure Accounting policies for: Comparable to Accounting Accounting Comparable to Comparable to Comparable to The details of Comparable to Not defined. For long-term Comparable to As per IAS. Accounting Accounting IAS policies for: policies for: IAS. IAS. Overview of IAS (EAL investments such IAS. investments IAS Except this, no policies for: policies for: • the determination of financial incomes Appendix 3; EASB as name of it, (including other disclosure carrying amount of

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carrying amount of carried from Equity Method). address, purchase investments in required. investments; • the • the ownership of price, write-off if subsidiaries and • the • the determination of determination of these financial Not specified. were have to be associates) - determination of determination of

• the treatment of changes carrying amount carrying amount investments. disclosed. aggregate carrying amount carrying amount in market value of current of investments; of investments; Not specified. amounts of: of investments; of investments; investments carried at • • Not specified. • • market value; and the treatment of provisioning. basis of the treatment of changes in Not specified. • shares, creation of changes in • the treatment of a market value of provision to market value of • revaluation surplus on current securities, investments. current sale of a revalued investments investments • long-term loans, Comparable to investment. carried at IAS. In relation to carried at Not specified market value; provision to market value; In addition: • other investments: and • the treatment of investments. • market value of • • a revaluation opening not applicable. marketable investments, if surplus on sale In addition balance at

they are not carried at of a revalued reconciliation of January 1; Not applicable. market value; investment; and opening to closing balance of long- • additions; • Not applicable. fair value of investment • market value of term investments properties, if they are not marketable should be • disposals; and (SAS 3.1) Long- carried at fair value; investments, if provided. term investments • they are not closing balance in the capital of • restrictions on the carried at For current at December other enterprises, realizability of investments market value. investments – 31. long-term loans, or the remittance of aggregate long-term deposits income and proceeds of For long-term amounts of: Separately and warranties, as disposal; and Not specified investments disclosed well as investments • movements for the period stated at revalued investments in • own shares for relating to related in the revaluation surplus amounts, redemption of the resale, parties. and the nature of such disclose: investor’s own shares should be movements. • other securities. In addition: recorded • For long-term investments the date of the separately. In addition for • description of stated at revalued amounts, latest publicly traded investments; disclose: revaluation; (SAS 3.2) Long- companies: term investments • investments • • the basis of in the capital of the policy for the with market revaluation and other enterprises frequency of revaluations; • value above whether an currency should be carrying value; • the date of the latest external structure of classified as revaluation; and valuator was each class of • acquired shares, long-term and restrictions on involved; and the realizability acquired • the basis of revaluation current of investments participating and whether an external • movement of investments, or the interests and valuator was involved. the revaluation acquired total • aggregate remittance of surplus on the capital in other amounts of income and disposal. enterprises, while cost, write-offs proceeds of given long-term and carrying disposal. loans should be For investment amount of long- classified as loans entities an term made on the basis analysis of the investments Balance sheet of loan agreements investment (other than includes separate and as loans made portfolio is long-term columns for cost through requested. loans) for: and provision of investments in debt the investments. • freely securities marketable, listed investments,

• freely marketable, traded in Over The Counter markets investments,

• freely marketable, unlisted and not traded in Over The Counter markets investments,

• not freely marketable investments.

• Aggregate amounts of

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cost, market value and carrying amount of current investments classified as above.

Income Include investment income Comparable to Not specified. Include Comparable to Only overview of Comparable to The dividend has Comparable to Not defined. Disclose Comparable to Income statement Same as IAS, statement comprising: IAS investment IAS. financial incomes IAS, presentation to be recorded as IAS. separately: IAS • As per IAS should include: except for: income line carried from in income financial income. reductions of the • interest, royalties, comprising: ownership of statement (EAL • As per IAS • interest, carrying amount dividends, rentals (on these financial Appendix 2, EASB • dividends royalties, of investments for The gain or loss on • long-term and current • interest, investments. Income Statement received Not specified dividends, other than a investment as well investments); discounts, Accounts). (including rentals (on temporary decline as write-off of • Not specified dividends, trade . those received long-term and in value of long- • investments has to profits and losses on gains/losses . from current term investments, be recorded as • Not specified disposal of current (on long-term subsidiaries investments); and reversals of investments; financial expense. and current and • As per IAS such reductions. investments). associates), • revenue in the • unrealized gains/losses • reductions of • As per IAS amount of on current investments the carrying proceeds and carried at market value; amount of long- • As per IAS expense in the and term and amount of cost • Not specified • current of the reductions to market value investment and reversals of such investments.

reductions required to state current investments For public at the lower of cost and companies market value. additionally disclose: In addition, include in income: • interest from • reductions of the carrying financial amount of investments for investments, other than a temporary • decline in value of long- financial income term investments, and and expense reversals of such derived from reductions; and changes in carrying amount • profits and losses on of long-term disposals of long term and current investments. investments,

Disclose significant amounts • profits and included for: losses on disposal of • interest, royalties, long-term and dividends and rentals on current long-term and current investments. investments;

• profits and losses on disposal of current investments; and

• changes in value of such investments.

86 Comparison of International Accounting Standards and Lithuanian Accounting Policies

19. Consolidated Financial Statements and Accounting for Investments in Subsidiaries Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 27) Republic Macedonia

Identificatio A subsidiary is an entity that is Comparable to Comparable to A subsidiary is an Comparable to Comparable to Comparable to Control is A subsidiary is an Not defined No direct Comparable to There is nothing Comparable to Preface to the n of controlled by another entity. IAS IAS entity that is IAS IAS IAS (EASB, presumed if the entity that is definition of a IAS in the RAS IAS, except for Slovene subsidiarie controlled by Consolidated parent company controlled by subsidiary is equivalent to this treatment of SPEs Accounting s Control is presumed when the another entity. Accounts). meets at least another entity. provided, but it IAS. is not defined. Standards No.9 parent acquires more than half one of the can be derived

of the voting rights of the Control is following three Control is from the Subsidiary is an enterprise. presumed when criteria: presumed when definitions of entity, in which

the parent the parent ‘holding company’ another company Even when more than one half acquires more • parent acquires more and ‘control’. has: of the voting rights is not than half of the company holds than half of the acquired, control may be • An absolute voting rights of more than one voting rights of Control is evidenced by power: majority of the the enterprise. half of the the enterprise or presumed when voting rights or any of the votes of • over more than one half of more than 50% on the basis of conditions shareholders or the voting rights by virtue of owned capital. Even when more agreement with specified in IAS members of an agreement with other than one half of other owners are fulfilled or shareholders investors; or the voting rights is the parent additionally when: assembly in the • not acquired, company subsidiary; to govern the financial and • control may be possesses the company operating policies of the • The right to evidenced by more than one has the power other enterprise under a appoint the power: half of the to appoint or statute or an agreement; or majority of voting rights remove the • members of the • to appoint or remove the over more than alone. majority of the board of majority of the members of one half of the members of the • directors, the board of directors; or voting rights by parent supervisory virtue of an company has a body the management • to cast the majority of votes agreement with right to appoint members of the board or at a meeting of the board of other investors; or remove the board of supervisory

directors. or majority of directors or board in the board of from subsidiary and • Special purpose entities to govern the directors and management is also owner of (SPEs) should be financial and shares, supervisory level of the consolidated where the operating board. company or it’s permanent substance of the relationship policies of the subsidiary deposits or indicates that the SPE is other enterprise • on the basis of comprise the similar in the controlled by the reporting under a statute agreement with majority of the subsidiary; enterprise. This may arise or an the owners or board of • even where the activities of agreement. according to the directors of the A majority control in the the SPE are predetermined. deed of other company. [SIC 12] foundation the subsidiary parent exercised as company specified in the exercises paragraph decisive power above, without and control having shares, over the permanent subsidiary deposits or regardless the similar in the voting rights subsidiary; and the ability • The power to to appoint or cast more than remove the one half of the members of votes of boards. shareholders or The following members of rights must be shareholders taken out of assembly by consideration virtue of an when ascertaining agreement with the control over other investors. the subsidiary: Other definitions • rights exercised of subsidiaries are instead of comparable to others on the IAS. basis of agreement.

• rights handed over as a security, and rights exercised in accordance with third party’s order.

• rights handed over to guarantor and those rights

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excised on the behalf of the guarantee.

No regulation regarding SPE.

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Subsidiarie A subsidiary should be Not specified Comparable to The statutory Comparable to A subsidiary could Comparable to A subsidiary is not Subsidiary should Not defined A subsidiary Not specified. Not specified. A subsidiary must Preface to the s to be excluded from consolidation IAS. rules do not IAS be excluded from IAS (EASB, obligatory to be be excluded from should be be excluded from Slovene excluded when: prescribe any consolidation Equity method – included in consolidation excluded from consolidation Accounting from requirements as when: Consolidated consolidation when: consolidation when it: Standards No.9: • control is intended to be consolidati to consolidation of Accounts). when: when: temporary because the • operates under Comparable to on subsidiaries. • the participation • it is temporarily subsidiary is acquired and dissimilar IAS. on net turn-over Specific • control is controlled by • It was acquired held exclusively with a view activities; or or on equity of exceptions for intended to be Parent with a view to to its subsequent disposal in consolidated credit and temporary company and its subsequent the near future; or • is in liquidation. companies is insurance because the is held for re- disposal, insignificant subsidiary is sale within the • it operates under severe institutions in line acquired and next 12 • Control is long-term restrictions, which with the • control is for a held exclusively months; intended to be A subsidiary significantly impair its ability applicable long period with a view to temporary should be to transfer funds to the directives. restricted its subsequent • it operates (expected to excluded from parent. disposal in the under severe last less than consolidation • seat of long-term one year from Specifically provided that near future; or when: subsidiary is restrictions, the balance exclusion on the basis of abroad and the • subsidiary which sheet date) or • control is dissimilar activities is not cost of could not significantly is significantly intended to be justifiable. appropriate present the impair its ability limited, temporary information for information for to transfer because the consolidation consolidation, funds to the • Amounts subsidiary is would be very or it means a parent. stated in the acquired and high considerable subsidiary’s held cost comparing financial exclusively with • subsidiary is in benefits to statements are a view to its bankruptcy present it, or immaterial in subsequent subsidiary can relation to the disposal in the present the holding near future; information for company’s consolidation financial • it operates late. It applies statements under severe only for the first (detailed long-term year of guidance is restrictions consolidation. provided on which materiality significantly • there are thresholds in impair its ability significant and this respect). to transfer permanent funds to the legal limitation Subsidiaries parent; for the parent excluded from company to consolidation • it is immaterial exercise its subject to subsidiary in rights significant relation to true restrictions of and fair view of • if the control should be consolidated subsidiary is consolidated financial not material, using the equity statements; or and without it method. • the collection of consolidated Additionally information F/S is fairly subsidiaries necessary for stated and conducting consolidation correct. completely of subsidiary is too expensive • dissimilar the parent activities, the full or too late. company is a consolidation of subsidiary of which would another impair the group company who financial prepares statements, consolidated should be F/S, and the consolidated parent using the equity company and method. its subsidiaries are consolidated in the F/S of the other company.

• owners who have 10 % shares (in case of Kft 20 %) did not ask for the consolidated F/S from the parent company who is a subsidiary of an other company to prepare it 6 months before the date of the consolidated 89 F/S of the other company (who consolidates the parent company and Comparison of International Accounting Standards and Lithuanian Accounting Policies

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Presentatio Consolidated accounts (i.e. Not specified Comparable to The statutory Comparable to Consolidated As Estonia is not It is same in HAS. Comparable to Not defined Consolidated Not specified. Not specified. No exemption if Preface to the n accounts of a group presented IAS. rules do not IAS financial yet a member of Parent company IAS accounts required the parent is itself Slovene as those of a single prescribe any statements are the EU – specified is not obliged to unless: a wholly owned Accounting enterprise) required unless the 90% subsidiaries requirements as required when: in its entirety due prepare subsidiary. Each Standards No.9: parent is itself a wholly owned are also exempt, to consolidation of to the directives. consolidated • the holding individual subsidiary. provided that the subsidiaries. • Size of the financial company is not company holding • A parent approval of the group - if sum statements when a joint stock shares in company is 90% subsidiaries are also minority is of equity of all in the two years company, subsidiary, joint exempted from exempt, provided that the obtained and the companies in (following each limited liability venture or presenting approval of the minority is fact is disclosed. the group is other) prior to the company or associate has to consolidated obtained. greater than current year, two other prepare financial CZK 300 mil of the following commercial consolidated statements if it

and sum of net criteria are not code company accounts. is itself a revenues of all exceeded: (e.g. a state subsidiary, i.e. companies in enterprise), There is no wholly of the group is • total assets 500 exemption for virtually wholly greater than mHUF • the parent 90% subsidiaries. owned by CZK 600 mil company is another the parent • annual net itself at least a enterprise, company has revenues 1,000 90% subsidiary when the to compile mHUF subject to parent approval of all consolidated • company has financial yearly average minority obtained the statements. head count 250 shareholders approval of the persons (for listed owners of a If the parent companies Parent company’s minority company is only wholly values must be interest. A wholly-owned owned added to parent subsidiary of an subsidiaries subsidiaries’ company that other company or qualify), values when does not a foreign group, present which prepare calculating the • the group is above criteria. consolidated consolidated F/S classified as ‘a financial small group’, in accordance It does not apply statements i.e. at least 2 with the 7th EU to financial and should disclose of the 3 values directive, does not insurance in its separate specified below have to compile institutions and financial are not consolidated F/S. listed companies. statements the exceeded: reason why • consolidated average employment financial level of 150 statements are people, not presented as well as the • total assets at bases used to the balance account for sheet date – subsidiaries. polish currency equivalent of 3 million EURO,

• net sales of goods for resale and products plus financial income – polish currency equivalent of 6 million EURO.

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Accounting The difference between the Not specified Parent and All Byelorussian Comparable to A parent and its A parent and its If the date of The dates of Not specified If this does not Consolidation is There is nothing The parent and its Preface to the year-ends dates of financial statements subsidiaries legal entities IAS subsidiaries subsidiaries must consolidated F/S financial impair the group not specified in the RAS subsidiaries, Slovene used for consolidation should have the should prepare should have the have the same is different than statements of financial equivalent to this which are Accounting purposes should not exceed same financial annual financial same financial financial year the date of the parent’s company statements, the IAS. registered in Standards No.9: three months. If they are year (all Bulgarian reports as of year (all Czech (EAL §17). subsidiaries’ F/S. and subsidiaries, date of financial Slovakia should drawn up to different dates, entities has to 31.12. entities must have Subsidiaries are included in statements of have the same When the adjustments should be made have the calendar the calendar year obliged to prepare consolidation, subsidiaries and financial year (all financial for the effects of significant year as the as the financial interim F/S as of must be the associates used Slovak entities statement used in transactions or other events financial year). year). the date of the same. for consolidation have to have the the consolidation that occur between those consolidated F/S. purposes may be calendar year as are drawn up to dates and the date of the Overseas The period of earlier than the their financial different dates, parent’s financial statements. subsidiaries could interim F/S cannot parent company year). adjustments prepare financial exceed 12 year-end, but the should be made statements as of months. The date difference cannot In case of foreign for the effects of different date in of consolidated exceed three subsidiaries, the significant which case IAS F/S can be the months. rule is transactions or rules apply. date: comparable to other events that In such case IAS. occur between • if the parent disclosures of those dates and company and significant events the date of the the affecting assets, parent company’s subsidiaries liabilities, profits financial are Hungarian and losses in the statements. In entities it is intervening period any case, the December 31. should be made. difference between reporting • if among the Otherwise dates should not subsidiaries separate financial be more than there are statements for full three months. foreign twelve months companies, the made up to the date can be (of same date should course the be prepared for above) or the consolidation date of the purposes. most significant foreign subsidiary’s F/S or the date of the majority of the foreign companies’ F/S.

Accounting Uniform accounting policies Not specified Comparable to Uniformity of Comparable to Comparable to Comparable to Comparable to Uniform Not defined Uniform group Not specified. Not specified. Comparable to Preface to the policies should be used throughout the IAS accounting IAS IAS IAS (EASB, IAS accounting accounting IAS. Slovene group. If it is impracticable to policies Equity Method – policies should be policies should be Accounting do so, that fact should be throughout the Consolidated used throughout followed or Standards No.9: disclosed together with the group is not Accounts). the group. If appropriate proportions of the items in the required. subsidiary use adjustments Same as IAS. consolidated financial other accounting should be made statements to which the policy, it should in the different accounting policies make adjustments consolidated have been applied. for consolidation financial purposes. If it is statements. impracticable to do so, that fact However if the should be application of disclosed together different with the accounting proportions of the policies by items in the subsidiaries or consolidated associates does financial not impair the statements to consolidated which the different financial accounting statements, the policies have relevant been applied. adjustments may be ignored with appropriate disclosures included in the additional notes.

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Presentatio Minority interests in the assets Not specified Comparable to Not specified. Comparable to The treatment is Comparable to Minority interests Comparable to Not defined Comparable to Not specified. There is nothing Minority interest in No standard n of of subsidiaries should be IAS IAS in general IAS (EASB should be IAS IAS. in the RAS the assets of covers this area, minority presented separately from comparable to Consolidated presented only in equivalent to this subsidiaries use IAS. interests liabilities and parent’s equity. IAS. Accounts). the owner’s equity No specific IAS. should be Minority interests in income on a separate requirement in the presented

should also be separately line. Current situation where separately, but as losses applicable presented. year’s earning a part of equity. appears on that to the minority Minority interest in Where losses applicable to the line only next exceed its interest income statement minority exceed its interest in year, as there is in the equity. In should also be the equity, the excess and any no minority practice losses presented further losses attributable to interest in the are attributable to separately. the minority are charged to the profit and loss. the minority in full. group except to the extent that The consolidated Losses are the minority has a binding profit/loss means applicable to the obligation to, and is able to, the profit of parent minority interest in make good the losses. If the company and its full amount, not to subsidiary subsequently subsidiaries. Next the group. makes profits, the group is year the current allocated all such profits until earnings of the the minority’s share of losses subsidiaries must previously absorbed by the be split between group has been recovered. parent company and minority

interest.

There is a special line in the consolidated owner’s equity called change in subsidiaries’ equity. It contains the split of current earnings of the subsidiaries and the parent company’s portion of other items which change the owner's equity in the stand alone subsidiaries’ F/S (recently these items decreased significantly, but few may occur under HAS).

HAS does not specify losses applicable to the minority; it is reasonable to follow the IAS instructions.

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Treatment Investments in subsidiaries Not specified Investments in Carry at cost Comparable to Investments in all Investments in Investments in Comparable to Not defined Investments in Investments in There is nothing Investments in Same as in parent’s that are included in the subsidiaries that under the policy IAS subsidiaries subsidiaries shall subsidiaries that IAS subsidiaries (both subsidiaries shall in the RAS subsidiaries that IAS. financial consolidated financial are included in for long-term should be be included in the are included in included and be included in the equivalent to this are included statements statements should be included the consolidated investments. included in the parent’s own the consolidated excluded from parent’s own IAS. in/excluded from in the parent’s own financial financial parent’s own financial financial consolidation) are financial the consolidated statements either: statements should financial statements using statements should carried at cost in statements using financial be included in the statement carried the equity method be included in the parent’s financial the equity statements should • using the equity method of parent’s own at cost. If in accordance parent’s own statements. method. be included in the accounting; or financial diminution in with EAL §28 financial parent’s own The carrying • statements at cost value the (unless excepted statements either: financial carried at cost or revalued under the parent’s provision is under EASB, amount of statements at amounts under the parent’s accounting policy created. Equity method). • using the investments cost. A provision accounting policy for long- for long-term equity method should be can be created in term investments. investments (NAS of accounting; reduced to case of diminution or recognize a Where a subsidiary is 25 Accounting for in value. investments). permanent excluded from consolidation, • carried at cost diminution in in the parent’s financial or market value value. statements, the interest in the whichever is subsidiary should be lower. Write Equity accounting accounted for as an back is not in parent’s investment. allowed. financial statements is not Subsidiary allowed. excluded is treated comparable to IAS.

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Disclosure Disclose a list of significant Not specified Comparable to Not specified Comparable to Disclosure Comparable to Same as in the Comparable to Not defined Disclose a list of Comparable to Not specified Comparable to Same as IAS. subsidiaries, with details IAS. IAS requirements as IAS (EASB Equity IAS IAS all subsidiaries, IAS. IAS. including: defined in Czech Method – with details In addition, in the legislation for Consolidated • plus the value including: • name; parent’s own consolidated Accounts). of the owner’s financial equity of the • name and • financial country of incorporation or statements statements are subsidiary place of residence; and disclose the different than owned by the residence, accounting policy parent • percentage ownership. those defined for • applied by separate financial company. scope of subsidiaries. statements. The business, Where applicable, disclose: requirements for • percentage • the reason why any consolidated shareholding subsidiary has not been financial and consolidated; statements do not percentage of include a • where the parent does not voting rights if significance different. own more than half of the concept as the voting power in a requirements for More detailed subsidiary, the nature of the separate financial disclosures are relationship; statements do. required for • the name of any entity in publicly traded In general the companies. which the parent owns information more than one half of the specifically For subsidiaries voting power but it is not required by IAS is excluded from treated as a subsidiary, not that different consolidation because of the absence of than those disclose: control; and required by Czech law. • reason for • the effect of the acquisition exclusion, and disposal of subsidiaries on the financial position and • net sales the results for the current revenue and and preceding year. net profit/loss for the financial year,

• details of intra- group transactions.

Additionally disclose:

• amount of goodwill or negative goodwill for each subsidiary with details of how it was established and amount of accumulated depreciation at the balance sheet date,

• effect of changes in the structure of the group and specifically - for subsidiaries disposed of or excluded from consolidation - net assets and net profit/loss for the proceeding financial year,

• profit/loss on any sale or part sale of shares in a subsidiary.

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20. Accounting for Investments in Associates Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 28) Republic Macedonia

Definition An enterprise in which the Not specified An enterprise in Not specified Comparable to Comparable to Comparable to Comparable to An enterprise Not defined. No direct Not specified Not specified. Comparable to No standard of investor has significant which the investor IAS. IAS - an IAS (EASB, IAS. where the definition of an IAS - an covers this area, associate influence and which is neither has significant associated Equity Method) - investor holds associate is associated use IAS. a subsidiary nor a joint influence and company is a an associated Same. The from 25% to 50% provided, but it company is a venture. owns less than company where company is a percentage is of the share can be derived company where half of the shares, the investor company where 25%, instead of capital but has no from the the investor Significant influence is the or of voting rights, directly or the investor 20 % and in case voting majority. definitions of directly or power to participate in financial or representation indirectly controls directly or of financial ‘holding company’ indirectly controls and operating decisions, but is on the Board of between 20% and indirectly controls institutions it is The investor and ‘significant between 20% and not control over those policies. Directors of the 50% of the voting between 20% and 10%. exercises influence’. 50% of the voting enterprise (NAS shares of the 50% of the voting significant shares of the A holding of 20% or more will 25). associated shares of the influence over the Significant associated indicate significant influence company. associated Company’s influence is company. unless it can be clearly A holding of 25% company. operations and presumed when demonstrated otherwise. If the or more will assumes certain 20% of shares or holding is less than 20%, the indicate responsibility for more is held in investor will be presumed not significant its financial another company. to have significant influence influence unless it performance Otherwise it can unless such influence can be can be clearly be demonstrated clearly demonstrated. demonstrated by the power to otherwise (NAS participate in A substantial or majority 27). financial and ownership by another investor operating does not necessarily preclude decisions of significant influence. another company.

No specific guidance is provided how significant influence should be demonstrated in the absence of 20% shareholding.

Consolidate Use the equity method of Not specified Associates, who The statutory Comparable to Comparable to Comparable to Comparable to Not specified in Not defined. Use the equity Not specified Not specified. Comparable to Preface to the d financial accounting, unless the have material rules do not IAS IAS. IAS (EASB Equity IAS except for the local method of IAS Slovene statements investment is acquired and impact over the prescribe any Method), except long terms legislation, refer accounting, Accounting held exclusively with a view to true and fair requirements as credit and restrictions, which to the IAS 28 unless the Standards No. 9: disposal in the near future, in presentation of to consolidation of insurance are not dealt with investment is which case it should be carried the financial subsidiaries. institutions are in under HAS. acquired and held • Financial at cost and income recognized statements of the line with the exclusively with a statements of

only on the basis of group are directives (EASB view to disposal associates are distributions. consolidated by Consolidated or the significant not

using Accounts). influence will last consolidated in Use of the equity method proportionate less than one the financial should cease from: consolidation year. statements of method (NAS 27). the investor. • the date that significant Use of the equity influence ceases; or method should • Cost method is used for • cease from the the imposition of severe date that accounting for long-term restrictions which significant investments in significantly impair the influence ceases. associates. ability of the associate to transfer funds to the No specific investor. guidance is provided how the The carrying amount of the carrying amount investment at that date should should be be regarded as cost thereafter. established in case of long-term restriction. In practice the original cost of investment is used.

Investor’s Include the associate either: Not specified Include the Present as a long- Comparable to Investments in Equity method Comparable to The accounting Not defined. Investments in Not specified The associate is Include the Preface to the own associate as a term investment IAS associates that (EAL §29). IAS, however for associates is associates should included as a associate at cost. Slovene financial • using the equity method or long-term valued at cost. are included in market value performed under be carried at cost long-term Accounting statements at cost, whichever is used in investment the consolidated should only be two methods: less amounts investment and If the value of an Standards No. 9: the consolidated financial measured initially financial applied if lower written off due to carried at cost. investment is statements (or which would at cost thereafter statements should than costs. permanent lower than cost • the cost • Cost method is have been appropriate if the carry at fair value. be included in the diminution in using the equity method used for investor did issue (NAS investor’s own value. method, a Reversal of any accounting for consolidated financial 25/Accounting financial provision should write down is not • the equity investments in statements); or Law). statement carried be recorded. allowed. method associates. at cost. If • The investor as a long-term investment investment didtt should disclose

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and carried at cost or diminishes in should disclose revalued amount. value a provision No specific The use is similar the investments is created. disclosure to the IAS 28. where the value Where consolidated accounts requirements if of investment are not prepared, and the the equity method using the equity equity method of accounting is is not applied. method not used in the investor’s own (considered as financial statements, the market value) is investor should disclose the significantly potential effect if equity higher than cost. accounting had been applied (provided that equity Dividend income accounting would have been from associate appropriate in the consolidated should be financial statements). disclosed separately for each associate.

Transaction Where an associate is Not specified Not specified Treated as Comparable to Elimination of Comparable to Comparable to Not specified in Not defined. Where an Not specified Not applicable. Comparable to Not applicable. s with accounted for using the equity transactions with IAS profits not IAS (EASB Equity IAS. the local associate is Equity method is IAS, except there associates method, unrealized profits and other third parties. required. Method). legislation, refer accounted for not specified. is no specific losses resulting from upstream to the IAS 28. using the equity limitation Restriction in (associate=>investor) and method, regarding the elimination of downstream unrealized profits elimination of unrealized losses (investor=>associate) and losses unrealized losses is not specified. transactions should be resulting from however applying eliminated to the extent of the transactions general provisions investor’s interest in the between an the result might associate. associate and be the same. other However, unrealized losses consolidated should not be eliminated to the group companies extent that the transaction should be provides evidence of an eliminated to the impairment of the asset extent of the transferred. [SIC 3] group effective interest in the

associate unless:

• relevant information is not known or available,

• Non- elimination does not impair the view of consolidated financial statements.

Accounting Where it is not possible to Not specified Not specified All Belarussian Comparable to A parent and its Comparable to Interim F/S must Not specified in Not defined. The same Not specified Not specified. The parent and its N/A year-ends obtain financial statements to legal entities IAS subsidiaries, IAS. be prepared by the local regulations as for associates, who the same date as the investor, should prepare associates should the associates. legislation, refer subsidiaries are registered in the most recent available annual financial have the same to the IAS 28. specified above. Slovakia, should financial statements of the reports as of financial year (all have the same associate should be used in 31.12. Czech entities financial year (all applying the equity method, must have the Slovak entities and adjustments made for the calendar year as must have the effects of any significant the financial calendar year as events occurring between the year). their financial accounting period ends. year).

In case of foreign associates, the rule is comparable to IAS.

Accounting Where the associate uses Not specified Not specified Uniformity of Comparable to Associated Comparable to Comparable to Not specified in Not defined. Uniform group Not specified Not specified. Comparable to N/A policies accounting policies, which accounting IAS companies should IAS. IAS the local accounting IAS differ from those of the policies use the same legislation, refer policies should be investor, adjust the associate’s throughout the accounting to the IAS28. followed or treatment and, if it is not group is not policies as the appropriate practicable to make such required. parent company. adjustments adjustments, that fact should should be made be disclosed. in the

consolidated financial

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statements.

However if the application of different accounting policies does not impair the consolidated financial statements, the relevant adjustments may be foregone with appropriate disclosures included in the additional information.

Investor’s Where the investor’s share of Not specified Not specified Performance of Comparable to Not specified Comparable to Comparable to Not specified in Not defined. The investor’s Not specified Not specified. Where the N/A share of net losses of an associate equals associate does IAS IAS (EASB, IAS the local share of losses of investor’s share of liabilities or exceeds the carrying not affect carrying Equity Method). legislation, refer an associate is losses of an

amount of the investment, the value of the to the IAS28. not restricted associate equals No specific investor normally discontinues investment even if as a result or exceeds the regulations under including its share of further recorded by the investment is carrying amount HAS regarding losses and the investment is investor. reported at of the investment, obligation to reported at nil value. negative value. the investor made payments normally or similar. It is Additional losses are provided The investor’s continues reasonable to for to the extent that the obligations or including its share follow the IAS investor has incurred commitments in of further losses, instructions. obligations or made payments respect of an i.e. the carrying to satisfy obligations of the associate should amount of an associate that the investor has be provided for investment can be guaranteed or otherwise based on normal negative. committed. If the associate rules. subsequently reports profits, the investor resumes including its share of those profits only after its share of the profits equals the share of net losses not recognized.

Provision Provision should be made Not specified Not specified The statutory rules Comparable to Comparable to IAS Comparable to There is no Not specified in Not defined. Comparable to Not specified Comparable to Comparable to (SAS 3.11) Long- for where the decline is not do not require IAS IAS (EAL § 28). possibility to the local IAS. IAS. IAS term investments permanent temporary, each investment provisioning for account provision legislation, refer should be decline in being considered individually. permanent decline for decline in to the IAS28. charged directly value in value, however value in the to financial an entity is allowed consolidated F/S. expenses either, to create tax non- entirely or in part, deductible as soon as there provisions. are documented reasons to do so.

Disclosure Disclose for each associate: Not specified Not specified Not specified Comparable to Basically Comparable to IAS Comparable to Not specified in Not defined. Disclose a list of Not specified Investments in Comparable to Same as IAS, IAS comparable to IAS (EAL Appendix 3, IAS except for: the local all associates, associates should IAS. except for the • name; (see disclosure EASB Equity legislation, refer with details be disclosed as requirement for • no description comments above Method – to the IAS28. including: long-term Share of profits or separate • description; required under IAS 27 as Consolidated investments as a losses should be presentation of • name and • well). Accounts). separate item in part of financial share of profits or percentage ownership (and Plus: place of the balance revenues/expens losses. voting power, if different); residence, and • residence sheet. es in the income statement. Share place • scope of Share of profits or • method of accounting used. of prior period and business, losses should be • the proportion extraordinary Investments in associates shown as a amount of the • percentage items is not should be disclosed as long- separate item in owner’s equity shareholding disclosed term investments as a the income of the and separately separate item in the balance statement. The associates’ percentage of sheet. investor’s share of which is due to voting rights if the parent prior period and Share of profits or losses different. company. extraordinary should be shown as a items should also separate item in the income More detailed be disclosed. statement. The investor’s disclosures are share of prior period and required for extraordinary items should publicly traded also be disclosed. companies.

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For associates excluded from consolidation disclose:

• reason for exclusion,

• net sales revenue and net profit/loss for the financial year,

• details of intra- group transactions.

Additionally disclose:

• amount of goodwill or negative goodwill for each associate with details of how it was established and amount of accumulated depreciation at the balance sheet date,

• investments in associates accounted for using equity method as a separate item in the balance sheet,

• share of net profits/losses of associates as a separate item in the income statement.

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21. Financial Reporting in Hyperinflationary Economies Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 29) Republic Macedonia

Scope The IAS should be applied to the primary Not specified The NAS should N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A No standard N/A financial statements, including the be applied to the IAS covers this area consolidated financial statements, of any annual financial

enterprise that reports in the currency of a statements of hyperinflationary economy. any enterprise when there are indications that the economy is hyperinflationary .

Hyperinflation • Hyperinflation is indicated by Not specified Hyperinflation is N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A indications characteristics of the economic indicated when IAS environment of the country which include, the cumulative but are not limited to, the following: inflation rate over three years • The general population prefers to keep its exceeds 100%. wealth in non-monetary assets or in The first year of relatively stable foreign currency; the application of the NAS is • The general population regards monetary 1998. amounts not in terms of the local currency but in terms of relatively stable foreign currency;

• Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even it is short;

• Interest rate, wages and prices are linked to a price index; and

• The cumulative inflation rate over three years is approaching, or exceeds, 100%.

Gain or loss on In a period of inflation, an enterprise holding Not specified This gain or loss N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A net monetary an excess of monetary assets over monetary on the net IAS position liabilities loses purchasing power and an monetary enterprise holding an excess of monetary position is liabilities over monetary assets gains derived as the purchasing power. difference between the This gain or loss on the net monetary position change in may be derived as the difference resulting working capital from the restatement of non-monetary assets, for the period owner’s equity and income statement items. (grants are included, The gain or loss on net monetary position is inventory is included in net income for the period. excluded) and the result from the restatement of the working capital is multiplied by one half of the price index for the current year.

The gain or loss on net monetary position is included as a separate item in the owner’s equity.

Restatement of Balance sheet: Not specified Balance sheet: N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A financial IAS • statement based Monetary items are not restated; • Monetary on historic cost items are not • Non-monetary items except those carried convention restated; at fair market or net realizable value are restated by applying a general price index. • Non- monetary items, except Income statement items are restated by applying share capital, the change in the general price index from the reserves and dates when the items of income and expenses retained were initially recorded in the financial earnings are

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statements. restated by applying a general price index as of the date of acquisition or latest revaluation;

Income statement items are restated by applying the monthly general price index to the items of income and expenses incurred during the month.

Depreciation charged for the period is restated by applying a general price index from the date of acquisition of the respective fixed assets or latest revaluation.

Restatement of Balance sheet items are not restated because Not specified Historic cost N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A financial they are already expressed in terms of the convention is IAS statement based measuring unit current at the balance sheet applied only. on current cost date. convention Income statement items are restated by applying the change in the general price index from the dates when the items of income and expenses were initially recorded in the financial statements.

Taxes The restatement of financial statements in Not specified Not specified N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A accordance with IAS 29 gives rise to IAS differences between taxable income and accounting income. These differences are accounted for in accordance with IAS 12 Income taxes.

Cash flow All items in the cash flow statement should be Not specified Not specified N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A statement expressed in the terms of the measuring unit IAS current at the balance sheet date.

Corresponding Corresponding figures for the previous Not specified Corresponding N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A figures reporting period are restated by applying a figures for the IAS general price index so that comparative previous figures are presented in the terms of the reporting period measuring unit current at the end of the are restated by reporting period. applying a general price index so that comparative figures are presented in the terms of the measuring unit current at the end of the prior year.

Share capital and retained earnings are not restated.

The difference

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arising from restatement of the corresponding figures is presented as revaluation surplus (positive or negative figure).

Consolidated Financial statements of a subsidiary operating Not specified The rules N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A financial in hyperinflationary economies need to be applied to the IAS statements restated by applying a general price index of parent’s the country in whose currency it reports before financial they are included in the consolidated financial statements are statements issued by the parent. applied.

If financial statements with different reporting dates are consolidated, all items (monetary and non-monetary), need to be restated into the measuring unit current at the date of the consolidated financial statements.

Selection and For restatement of financial statements in Not specified The inflation N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A use of the accordance with IAS 29 a general price index index published IAS general price that reflects changes in general purchasing monthly and index power should be used. It is preferable that all annually by the enterprises that report in the currency of the National institute same economy use the same index. of statistics is applied.

Economies When an economy ceases to be Not specified Not specified N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A ceasing to be hyperinflationary and an enterprise IAS hyperinflationary discontinues the preparation and presentation of financial statements prepared in accordance with IAS 29, it should treat the amounts expressed in the measuring unit current at the end of the previous reporting period as the basis for the carrying amounts in the subsequent financial statements.

Disclosure Disclose : Not specified Not specified N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A IAS • The fact that financial statements are restated in terms of the measuring unit current at the balance sheet date;

• Whether the financial statements are based on historic or current cost approach; and

• The identity and level of the price index at the balance sheet date and the movement in the index during the current and the previous reporting period.

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22. Disclosures in the Financial Statements of Banks and Similar Financial Institutions Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 30) Republic Macedonia

Scope The IAS should be applied in the financial Not specified Comparable to N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A statements of banks and similar financial IAS IAS institutions (banks).

Accounting In order to comply with IAS 1 Presentation of Not specified In order to N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Generally, N/A policies financial statements, accounting policies comply with IAS accounting dealing with the following items may need to NAS 1, policies would be disclosed: accounting only deal with policies dealing the general • The recognition of the principal types of with the banking risks income; following items and the • may need to be accounting The valuation of investment and dealing disclosed: treatment of securities; such risks • • The (provisioning). The distinction between those transactions recognition of and other events that result in the the principal recognition of assets and liabilities on the types of balance sheet and those transactions and income; other events that only give rise to contingencies and commitments; • The principles • and methods The basis for determination of losses on of valuation of loans and advances and writing off financial uncollectable loans and advances; assets and • The basis for determination of charges for liabilities; general banking risks and the accounting • The treatment of such charges. distinction between those transactions and other events that result in the recognition of assets and liabilities on the balance sheet and those transactions and other events that only give rise to contingencies and commitments;

• The basis for determination of provisions;

• The basis of classification of the off balance sheet assets and liabilities;

• Criteria for and the amount of, the unrecoverabl e credits and deposits;

• Criteria for deferring of expenses and revenues;

• Criteria for maturity classification of assets and liabilities in the balance

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sheet.

Income A bank should present an income statement, Not specified Income N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Treatment N/A statement which summarizes income and expenses by statement is IAS comparable to nature and discloses the amounts of the presented in a IAS. principal types of income and expenses. specified format In addition to the requirements of another IAS, including the the disclosures in the income statement or following items: notes to the financial statements should include, but are not limited to, the following items of income and expenses: • Interest and similar • Interest and similar income; income; • • Interest expense and similar charges; Interest • Dividend income; expense • Fee and commission income; and similar • Fee and commission expense; charges; • • Gains less losses arising from dealing Fee and securities; commissio • n income; Gains less losses arising from • investment securities Fee and commissio • Gains less losses arising from dealing in n foreign currencies; expense; • Other operating income; • Gains less • Losses on loans and advances; • losses General administrative expenses; and arising • Other operating expenses. from dealing Income and expense items should not be securities; offset except for those relating to hedges and • Gains less to assets and liabilities, which have been losses offset. arising from investment securities • Gains less losses arising from dealing in foreign currencies; • Other operating income; • Other operating expenses.

Balance sheet A bank should present a balance sheet that Not specified Balance sheet is N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Treatment N/A groups assets and liabilities by nature and presented in a IAS comparable to lists them in order that reflects their relative specified format IAS.

liquidity. including the following items: In addition to the requirements of another IAS, the disclosures in the income statement or Assets notes to the financial statements should include, but are not limited to, the following • Cash and assets and liabilities: balances with the Assets central bank; • Cash and balances with the central • Cash and bank; balances • Treasury bills and other bills eligible for with other rediscounting with the central bank; banks; • Government and other securities held • Deposits for dealing purposes; and loans • Placements with, and loans and to other advances to, other banks; banks • Other money market placements; • Securities • Loans and advances to customers; and in the • Investment securities. current portfolio; Liabilities • Securities in the • Deposits from other banks; investment • Other money market deposits; portfolio

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• Amounts owed to other depositors; • Interest • Certificates of deposits; receivable; • Promissory notes and other liabilities • Tangible evidenced by paper; and fixed • Other borrowed funds. assets; and The amount at which any asset or liability is • Intangible stated in the balance sheet should not be fixed offset by the deduction of another liability or assets. asset unless a legal right of set-off exists and the offsetting presents the expectation as to Liabilities the realization or settlement of the asset or liability. • Deposits from other A bank should disclose the fair values of each banks; class of its financial assets and liabilities as • Other required by IAS 32 and IAS 39. money market deposits; • Amounts owed to non- financial institutions and other depositors; • Loans; • Interest payable; • Other liabilities; • Provisions for off balance sheet arrangeme nts; • Minority interest; and • Equity.

Contingencies A bank should disclose the following Not specified A bank should N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Treatment N/A and contingencies and commitments required by disclose in the IAS comparable to commitments IAS 10: notes the IAS. including off amount of any balance sheet • The nature and amount of commitments contingent Note 1: This items to extend credit that are irrecoverable liabilities in information is because they cannot be withdrawn at respect of part of an off- the discretion of the bank without the guarantees balance sheet risk of incurring significant penalty or letters of credit which is an expense; and and accepts. • The nature and amount of contingencies integral part of and commitments arising from off balance sheet. balance sheet items including those Notes generally relating to: do not discuss much greater • Direct credit substitutes including general guarantees of indebtedness, details. bank acceptance guarantees and standby letters of credit serving as Note 2: financial guarantees for loans and Litigation and securities; similar • Certain transaction-related contingencies contingencies including performance are not required bonds, bid bonds, warranties and to be disclosed, standby letters of credit related to but usually are. particular transactions; • Short-term self liquidating trade related contingencies arising from the movement of goods; • Those sale and repurchase agreements not recognized in the balance sheet; • Interest and foreign exchange rate related items including swaps, options and futures; and • Other commitments, note issuance facilities and revolving underwriting facilities.

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Maturity of A bank should disclose an analysis of assets Not specified Comparable to N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Treatment N/A assets and and liabilities into relevant maturity groupings IAS (Law on IAS comparable to liabilities based on the remaining period at the balance Bulgarian IAS. sheet date to the contractual maturity date. National Bank).

Example of periods of maturity are: Up to 1 month; From 1 month to 3 months; From 3 months to 1 year; From 1 year to 5 years; and From 5 years and over.

Maturities could be expressed in terms of: • The remaining period to the repayment date; • The original period to the repayment date; or • The remaining period to the next date at which interest rates may be changed.

Concentrations A bank should disclose any significant Not specified Comparable to N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Not required to N/A of assets, concentrations of its assets, liabilities and off IAS IAS be disclosed liabilities and off balance sheet items. balance sheet items Such disclosures should be made in terms of geographical areas, customer or industry groups or other concentrations of risk. A bank should also disclose the amount of significant net foreign currency exposures.

Losses on loans A bank should disclose the following: Not specified Not specified N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Such N/A and advances • The accounting policy which describes IAS information is the basis on which uncollectable loans partially a part of and advances are recognized as an balance sheet expense and written off; which discloses • Details of the movements in the gross loans and provision for losses on loans and related advances during the period. It should provisions and disclose separately the amount reserves recognized as an expense in the period separately. for losses on uncollectable loans and Notes to the F/S advances, the amount charged in the are not required period for loans and advances written to be dealing off and the amount credited in the with such period for loans and advances information. P&L previously written off that have been effects are a recovered; part of P&L • The aggregate amount of the provision statement. for losses on loans and advances at the balance sheet date; and • The aggregate amount included in the balance sheet for loans and advances on which interest is not being accrued and the basis used to determine the carrying amount of such loans and advances.

Any amounts set outside in respect of losses and advances in addition to those losses that have been specifically identified or potential losses which experience indicates are present in the portfolio of loans and advances should be accounted for as appropriations of retained earnings. Any credits resulting from the reduction of such amount result in an increase in retained earnings and are not included in the determination of net profit or loss for the period.

General banking Any amounts set aside in respect of general Not specified Not specified. N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Comparable to N/A risks banking risks, including future losses and IAS IAS other unforeseeable risks or contingencies in addition to those for which accrual must be made in accordance with IAS 10 should be separately disclosed as appropriations of retained earnings. Any credits resulting from the reduction of such amount result in an

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increase in retained earnings and are not included in the determination of net profit or loss for the period.

Assets pledged A bank should disclose the aggregate amount Not specified Not specified in N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Comparable to N/A as security of secured liabilities and the nature and NAS 30 but IAS IAS carrying amount of the assets pledged as applied in security. accordance with NAS 4 Accounting for Tangible Fixed Assets.

Trust activities If the bank is engaged in significant trust Not specified Not specified N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A activities, disclosure of that fact and an IAS indication of the extent of those activities are made in its financial statements because of the potential liability if it fails in its fiduciary duties.

Related party When a bank has entered into transactions Not specified Not specified in N/A Comparable to N/A N/A N/A N/A N/A N/A N/A N/A Treatment N/A transactions with related parties, it is appropriate to NAS 30 but IAS comparable to disclose the nature of the related party applied in IAS relationship, the types of transactions, and the accordance with elements of transactions necessary for an NAS 24 understanding of the financial statements of Disclosures of the bank. Related Party Transactions.

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23. Financial Reporting of Interests in Joint Ventures Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 31) Republic Macedonia

Classificatio Jointly Controlled Operations Not specified Comparable to Jointly Comparable to No specific Not specified, the Only jointly Not specified. Not defined. Not specified. Not specified Not defined but No accounting No SAS covers n of joint – the use of assets and other IAS (NAS 28). Controlled IAS guidance, but the requirements as controlled Entities the understanding regulation for this area, use ventures resources of the venturers Operations – the definition of set out in IAS are are defined under is the same. jointly controlled IAS. rather than the establishment of use of assets and associated in conformity with HAS. operations or a separate entity. Each Ventura other resources of companies Estonian GAAP. assets. uses its own assets, incurs its the venturers includes a joint

own expenses and liabilities rather than the venture where the Definition of jointly controlled and raises its own finance. The establishment of venturer is in a revenue from the sale of the a separate entity. position to entities is joint product and any expenses The assets that exercise comparable to incurred in common are usually are put together significant IAS. shared among the venturers. in the operations influence.

are jointly owned

by the venturers. The revenue from Jointly Controlled Assets - the sale of the involving the joint control, and joint product and often the joint ownership, of any expenses assets dedicated to the joint incurred in venture. Each venturer may common are take a share of the output from usually shared the assets and each bears a among the share of the expenses incurred. venturers. No separate entity is established. This form of joint venture may be

established Jointly Controlled Entities - between involving the establishment of residents only. an entity in which each venturer has an interest, with a Jointly contractual arrangement which Controlled establishes joint control over Entities - the entity, which controls the involving the assets of the joint venture, establishment of incurs liabilities and expenses an entity in which and earns income. It may enter each venturer has into contracts in its own name an interest, with a and raise finance. It maintains contractual its own accounting records and arrangement presents financial statements. which establishes Each venturer is entitled to a joint control over share of the results of the jointly the entity, which controlled entity, although some controls the jointly controlled entities also assets of the joint involve a sharing of the output venture, incurs of the joint venture. liabilities and expenses and earns income. It may enter into contracts in its own name and raise finance. It maintains its own accounting records and presents financial statements. Each venturer is entitled to a share of the results of the jointly controlled entity, although some jointly controlled entities also involve a sharing of the output of the joint venture.

This form of joint venture is only prescribed for legal entities in the capital of which a foreign investor has a contribution.

Accounting Jointly Controlled Operations Not specified Comparable to Jointly Comparable to Not specified Comparable to Not specified Not specified Not defined. Not directly Comparable to Comparable to Accounting No SAS covers

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 31) Republic Macedonia treatment - the venturer should recognize IAS. Controlled IAS IAS. addressed. IAS. IAS, except that treatment of this area, use in its separate financial Operations - the RAS does not jointly controlled IAS. statements and consequently in venturers should In practice jointly The benchmark specify operations or

its consolidated financial keep separate controlled entities treatment for requirements for assets is not The benchmark statements: accounting and classified as jointly controlled consolidated defined. treatment is not produce separate subsidiaries and entities is not financial applied. • the assets that it controls and financial associates and applied. statements. For jointly the liabilities that it incurs; statements in accounted for The venturer shall controlled entities and respect to respectively Accounting use the equity both benchmark operations that (using full treatment of • method when and alternative the expenses that it incurs are not a part of consolidation or jointly controlled reporting for an treatment can be and its share of the income the joint equity method) in assets is not interest in a jointly applied. Both from the sale of goods or operations. One the venturer’s specified. The venturer shall controlled entity in methods are services by the joint venture. of the venturers consolidated use the equity both the separate equal. assumes financial Jointly Controlled Assets - method when financial responsibility to statements. the venturer should recognize in reporting for an statements of the keep separate its separate financial interest in a jointly In its separate venturer an in the accounts and statements and consequently in controlled entity in financial consolidated produce separate its consolidated financial both the separate statements jointly financial financial statements: financial controlled entities statements. statements in statements of the accounted for as • respect to the its share of the joint assets, venturer and in investments. jointly controlled appropriately classified; the consolidated operations. No guidance for • financial any liabilities that it has accounting Consolidation of statements. incurred and its share of any treatment of such financial liabilities incurred jointly with jointly controlled statements is not the other venturers; operations and prescribed by the jointly controlled • income from the sale or use statutory rules. assets. of its share of the output of the joint venture, and its share of expenses incurred Jointly by the joint venture; and Controlled Entity accounts for its • expenses in respect of its operations as a interest in the joint venture. resident legal entity under Jointly Controlled Entities: general statutory rules. Benchmark treatment - in its

consolidated financial Financial statements, a venturer should statements of the report its interest in a jointly venturers state controlled entity using contribution in the proportionate consolidation. joint venture as a Allowed alternative treatment long-term - in its consolidated financial investment at the statements, a venturer should value of the report its interest in a jointly contribution controlled entity using the estimated and equity method of accounting. agreed by the venturers.

Exceptions A venturer should account for Not specified Comparable to Not specified. Comparable to Not specified Comparable to Comparable to Not specified. Not defined. Not specified. Comparable to Not specified. A joint-venture No SAS covers for jointly the following interests in jointly IAS IAS IAS. IAS. IAS. (JV) can be this area, use controlled controlled entities as if they excluded from IAS. entities were investments: The treatment of consolidation an investment when: • an interest which is acquired under long-term and held exclusively with a restrictions is not • control is view to its subsequent specified. intended to be disposal in the near future; temporary and because the subsidiary is • an interest, which operates acquired and under severe long-term held exclusively restrictions that significantly, with a view to impairs its ability to transfer its subsequent funds to the venturer. disposal in the near future;

• it operates under severe long-term restrictions which significantly impair its ability to transfer funds to the

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parent;

• it is immaterial in relation to true and fair view of consolidated financial statements; or

• collection of information necessary for consolidation of joint venture is too expensive or too late.

• JV that operates in dissimilar activities should be consolidated using equity method

• JV in liquidation can be either consolidated using equity method or at cost. Both methods are equal.

Transaction When a venturer contributes or Not specified When a venturer Transactions Comparable to Not specified Comparable to The accounting Not specified. Not defined. Not specified. Not specified Not specified. Generally No SAS covers s between a sells an asset to a joint venture, contributes or between a IAS IAS. concept is the comparable to this area, use venturer while the assets are retained by sells an asset to a venturer and a same, but there is In practice for IAS IAS. and a joint the joint venture, provided that joint venture are no regulations in jointly controlled joint venture, venture the venturer has transferred the recorded in the HAS what to do if entities for which while the assets risks and rewards of ownership, are retained by normal manner as there is a full consolidation it should recognize the the joint venture, transactions permanent or equity methods proportion of the gain provided that the between two decline in value of are used, normal attributable to the other venturer has independent jointly controlled rules for venturers. The venturer should transferred the parties. entities (i.e. not elimination of recognize the full loss when it risks and rewards only the intra-group indicates a permanent decline of ownership, it proportion, but transactions and in value. should recognize the full loss must unrealized profits the proportion of be recognized). / losses This applies equally to non- the gain Only applicable under monetary contributions unless attributable to the proportionate these methods the gain or loss cannot be other venturers. accounting is are used. measured, or the other The venturer allowed. venturers contribute similar should recognize assets. Unrealized gains or Regarding non- the full loss when losses should be eliminated monetary it indicates a against the underlying assets contribution permanent (proportionate consolidation) or treatment decline in value. against the investment (equity comparable to

method). [SIC 13] IAS. When a venturer When a venturer purchases purchases assets The treatment of assets from a joint venture, it from a joint the venturer´s should not recognize its share venture, it should purchase from a of the gain until it resells the not recognize its joint venture is asset to an independent party. share of the gain not specified. Losses should be recognized if until it resells the they indicate a permanent asset to an decline in value. independent party. Losses should be recognized if they indicate a permanent decline in value.

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Disclosure Disclose a listing and Not specified Disclose: No disclosure Comparable to Not specified Comparable to To be disclosed: Not specified Not defined. For joint ventures Not specified Not specified. Disclose for each No SAS covers description of interests in requirements in IAS IAS (EAL not subject to joint venture: this area, use significant joint ventures and • a listing and this area exist. Appendix 3). • name and consolidation IAS. the proportion of ownership description of residence place using full interest held in jointly controlled interests in joint of the jointly consolidation or • name; entities. ventures; owned entities equity methods in • location of business; • • both venturer’s Disclose separately the share of the ownership separate and • an amount contingencies and venturer in the percentage consolidated of commitments relating to joint profit/loss of registered • the proportion financial ventures. the joint capital; amount of the statements at venture; least the following • percentage Where proportionate owner’s equity disclosures are ownership consolidation on a line-by-line • any which is due to required: (and voting basis has been used, disclose contingencies the parent power, if the aggregate amount included and company. different); in current assets, long-term commitments • No such name and • profit/(loss) assets, current liabilities, long- relating to joint scope of ventures; and regulation under for the year; term liabilities, income and business of the • expenses relating to interests in HAS. method of • the share of the joint venture; accounting joint ventures. • venturer in the No disclosure percentage used. liabilities of the requirements shareholding; • joint venture. regarding relative contingencies and proportion of In addition, commitments or jointly dividend income the aggregated controlled from joint venture amount included tangible fixed should be in assets liabilities assets and disclosed for each and P & L when intangibles; JV separately. proportionate • liabilities consolidation is incurred by No requirement applied. venturer for the regarding the sake of the disclosure of joint venture; contingencies and commitments • relative relating to joint proportion of ventures. shared liabilities; • income No requirement to generated from disclose the the joint aggregate venture and amounts relating related costs; to interests in joint • contingent ventures included liabilities and in assets and commitments liabilities, income related to the and expenses joint venture. where proportionate consolidation on a line-by-line basis has been used,

110 Comparison of International Accounting Standards and Lithuanian Accounting Policies

24. Financial Instruments: Disclosures and Presentation Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 32) Republic Macedonia

Scope Prescribes requirements for Not specified Prescribes Prescribes Comparable to Financial Not specified. Prescribes Comparable to Not defined. No regulations Not specified Not specified. Generally, No SAS covers presentation of on-balance requirements for requirements for IAS Institutions requirements for IAS. included in the financial this area, use sheet financial instruments and definitions, presentation of (requirements are definitions, ‘Act’. instruments are IAS.

identifies the information that classification, on-balance sheet not specified for classification, not defined as a For public should be disclosed about both recognition, financial non-financial recognition, specific area. companies on-balance sheet and off- valuation and instruments and institutions): valuation and disclosure Classification balance sheet instruments: disclosure of identifies the disclosure of requirements for between liability financial information that Prescribes financial • classification between certain group of and equity and instruments in the should be requirements for instruments in the liabilities and equity; financial between interest, financial disclosed about presentation of on financial instruments are dividends, losses statements of both on-balance balance sheet statements of the • classification of related prescribed under and gains is not companies. sheet and off- financial companies. interest, dividends, losses securities and defined. balance sheet instruments: and gains; The standard exchange instruments. should be applied • regulations. Requirements for • disclosure of disclosure of information for accounting accounting financial about factors that affect the periods beginning policies institutions are amount, timing and certainty on or after under of related cash flows; and January 1, 2000. • classification development. • between disclosure of accounting liabilities and policies. equity

• repo IAS 32 does not deal with recognition in recognition and measurement assets or issues relating to financial liabilities instruments. As for the off balance sheet instruments there IAS 39 Financial Instruments: is no special Recognition and requirements for Measurement which was presentation. finalized in December 1998 and is effective for accounting periods beginning on or after January 1, 2001, specifies recognition and measurement rules for both on- and off- balance sheet instruments.

Distinction An instrument should be Not specified. A financial liability No statutory rules Comparable to The key Comparable to A financial liability Not specified Not defined Not specified. Comparable to Not specified. Financial No SAS covers between classified according to its is any liability that in this area exist. IAS distinguishing IAS, (EAL §3). is any liability that IAS. instruments which this area, use liabilities substance. The classification is is a contractual feature is that a is a contractual have both IAS. and equity made on the basis of obligation to financial liability obligation to aspects of equity assessments at the time of deliver cash or involves a deliver cash or and liability are initial recognition - and is not another financial contractual another financial not covered by subsequently altered. asset to another obligation either asset to another SAS. Such enterprise or to to deliver cash or enterprise or to instruments would The key distinguishing feature exchange another financial exchange normally be is that a financial liability financial asset, or to issue financial classified involves a contractual instruments with another financial instruments with according to their obligation either to deliver cash another instrument, under another prevailing nature. or another financial asset, or to enterprise under terms that are enterprise under issue another financial conditions that potentially conditions that

instrument, under terms that are potentially unfavorable to the are potentially are potentially unfavorable to unfavorable. issuer. unfavorable. the issuer.

An instrument that does not Equity instrument An instrument An instrument give rise to such a contractual is a contract, that does not give that does not give obligation is an equity which secures rise to such a rise to such a instrument. share in the net contractual contractual assets of an obligation is an obligation is an A preferred share with a enterprise. equity instrument. equity instrument contractual obligation to redeem, or a right of the holder to require redemption or which In case that the provides for redemption on financial such terms that the issuer will instrument is a be economically compelled to bond, only issued redeem, should be classified as and sold bonds a financial liability. are recorded in the balance Where the rights and sheet. The unsold obligations regarding the bonds are part of manner of settlement of a the off balance financial instrument depend on sheet and there

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the occurrence or non- are no special occurrence of uncertain future requirements events, or on the outcome of related to their uncertain circumstances that presentation. are beyond the control of both the issuer and the holder, the financial instrument should be classified as a liability except where the possibility of the issuer being required to settle in cash or another financial asset is remote at the time of issuance, in which case the instrument should be classified as equity. [SIC 5]

Compound Financial instruments that Not specified Not specified No statutory rules Comparable to Comparable to Comparable to Not specified Not specified Not defined Not specified. Comparable to Not specified. Convertible bonds No SAS covers instruments contain both a liability and an in this area exist. IAS IAS. IAS IAS are treated as this area, use equity element - classify the liability with IAS. component parts separately in Equity description of accordance with their instruments are their nature in the substance. A bond which is defined only as notes. convertible by the holder into common and common shares contains two preferred shares. No other components - a financial All types of bonds regulation. liability (contractual obligation are a financial to deliver cash or other liability financial assets) and an equity instrument (the holder’s option to convert into common shares).

Classification is not revised as a result of a change in the likelihood that a conversion option will be exercised.

Interest, losses Classificati Interest, dividends, losses and Interest, losses Not specified. Interest, losses Comparable to Interest losses Comparable to and gains are Comparable to Not defined Not specified. Comparable to Not specified. Interest, losses No SAS covers on and gains relating to an instrument and gains are and gains are IAS and gains are IAS recorded in the IAS IAS. and gains relating this area, use measureme classified as a liability should recorded in the recorded in the recorded in the profit and loss to an instrument IAS. nt of be reported in the income profit and loss profit and loss profit and loss accounts in classified as a interest, statement – therefore dividend accounts in accounts in account in accordance with liability should be dividends, payments on shares classified accordance with accordance with accordance with the general law. reported in the losses and as liabilities are classified as the general law. the general law. general law. income gains. expenses. . • The after-tax statement. No statutory rules No rates with profit of the Dividend payments on exist with respect respect to year may be to dividends. dividends on disbursed as a shares classified shares classified dividend or as liabilities are as liabilities. profit-sharing not classified as only if the expenses amount of the Dividends are just equity, the tied- classified as profit up capital distribution even reserve, the for priority shares. tied-up accumulated profit reserve, and the evaluation reserve, as well as by the difference between the unrealized loss on exchange and the provisions does not fall below the amount of the issued capital following the disbursement of such dividend or profit-sharing.

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Disclosure For each class of financial Not specified Disclose: Not specified Comparable to Not required at Not required at Disclose: Not specified Not defined Not specified in Not specified. Not specified. Disclosure: No SAS covers asset and liability, and equity, IAS present from present from the ‘Act’. this area, use both recognized and • total amount of business entities business entities • the portfolio of • of nature is not IAS. unrecognized, disclose: on-balance other than credit other than credit financial For public precisely sheet and off- institution (EASB institution (EASB instruments; companies since required (just • details of the extent and balance sheet general rule for Consolidated Consolidated • 1999 detailed nature of the financial financial Accounts). Accounts). accounting disclosures the notes) instruments, including instruments by policies required for • significant terms and type and Financial regarding certain groups of accounting conditions; classification institutions: recognition, financial policies, accounting and groups; instruments. • • accounting policies and • accounting valuation of interest, • methods adopted; the portfolio of policies financial • financial instruments exposure to • specified information about instruments; • details about and the credit risks and exposure to interest rate risk; specified portfolio of fairs value • accounting disclosure – • financial financial specified information about policies instruments (as instruments; required just exposure to credit risk; and regarding significant and under the recognition, principle of • specified information about loans, recording and emissions • all significant conservatism fair value, or a statement that valuation of financial risks and valuations. it is not practicable. during the financial year.) related to Current assets If any asset is carried at greater instruments financial • should be valued than fair value, disclose its and the there are no instruments at realizable value carrying amount and fair value portfolio of requirements and portfolio of if lower than cost. and the reasons for not financial related to instruments

reducing the carrying amount. instruments; interest rate arising during risk exposure, the accounting Nature and • When a financial instrument is all significant credit risk period; financial impact of accounted for as a hedge, financial risks exposure (this financial disclose transactions hedged related to information is derivatives should against, a description of the financial required only be disclosed. hedging instruments and the instruments by ČNB as part

amount of any deferred gain or and portfolio of of prudential instruments loss and the expected timing of reports) recognition. arising during the accounting • the assets are period; presented at purchase price • total value of or nominal hedged value. instruments by Provisions are type and the created in case hedging that there is a reserves risk of non- created thereof, collectability. the average hedging efficiency by type of hedging instruments and for the company as a whole and the adopted policy regarding accounting and valuation of hedging efficiency.

Offsetting A financial asset and a financial Not specified. Comparable to Comparable to Comparable to A financial asset Comparable to Receivables and Comparable to Not defined Not specified for Not permitted. Not specified. If legal right exist No SAS covers of financial liability should be offset and the IAS. IAS. IAS and a financial IAS liabilities may not IAS financial assets offsetting of this area, use assets and net amount reported when an liability should be be offset against and liabilities. financial assets IAS. financial enterprise: offset and the net one another and liabilities is liabilities amount reported (principle of gross According to allowed. • has a legally enforceable when an settlement). general rules right to set off the amounts; enterprise: assets and Section 15(10) of Off-setting is not and liabilities should the Accounting allowed based • has a legally not be offset • Law. purely on intends either to settle on a enforceable except where intention net basis, or to realize the right to set off offsetting is (generally, the asset and settle the liability the amounts; required or principle of legal simultaneously. and permitted by law. forms prevailing over economic substance

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prevails).

25. Earnings Per Share Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 33) Republic Macedonia

Scope of Applies to enterprises whose Not specified Comparable to Not specified Comparable to Not specified EASB, Earnings Not specified Not specified Not defined Not specified. Not specified Not specified Not required by No SAS covers standard securities are publicly traded or that IAS. IAS Per Share shall Slovak this area, use However the are in the process of issuing be applied by an Accounting IAS. listing regulations securities to the public. accounting entity Standards. in the process of require listed Other enterprises which choose to issuing or that companies to

present earnings per share (EPS) has issued present EPS in information should also comply with shares to the their annual and the Standard. public and/or interim reports. whose shares Comments below are registered at therefore refer to the Central publicly traded Depository or companies. listed on the Tallinn Stock Exchange.

Other entities, which disclose earnings per share, should calculate it in accordance with the guideline.

Calculation of Calculated by dividing the net profit Not specified Comparable to Not specified Comparable to Not specified Comparable to Not specified Not specified Not defined Comparable to Not specified Not specified Not specified No SAS covers basic EPS or loss for the period attributable to IAS. IAS IAS (EASB, IAS. this area, use ordinary shareholders by the Earnings per IAS.

weighted average number of Share). ordinary shares outstanding during the period.

Definition of After deduction of: Not specified Comparable to Not specified Comparable to Not specified Comparable to Not specified Not specified Not defined Earnings for the Not specified Not specified Not specified No SAS covers earnings IAS. IAS IAS (EASB last 12 months this area, use • all expenses including tax, Earnings Per before the IAS. extraordinary items and minority Share). balance sheet interests; and date after • deduction of all preference dividends (including expenses, cumulative dividends that have including tax, not been declared). extraordinary items and minority interest and preference dividends (no matter whether declared).

Income from preference dividends receivable should be included even if not declared.

Number of Weighted average number of shares Not specified Comparable to Not specified Comparable to Not specified Comparable to Not specified Not specified Not defined Weighted Comparable to Not specified Not specified No SAS covers shares outstanding in the period - adjusting IAS. IAS IAS. average number IAS. this area, use the shares at the beginning of the of shares IAS.

period by the number of shares The weighted outstanding in

bought back or issued during the average number the period. period, multiplied by a time- of shares should weighting factor. be adjusted if the Weighting factor number of determined by

Weighting factor determined by common shares reference to the

reference to date of issue or date of is adjusted, even length of the buy-back of shares. Standard though the equity period (relevant includes extensive guidance on amount is not proportion of the appropriate recognition dates for changed. reporting period)

shares issued in various in which ordinary The time- circumstances. shares of the weighted factor is given issue determined by

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determined by ranked for reference to date dividend. of issue or the date of the buy- back of shares.

Diluted EPS Earnings and number of shares to Not specified Comparable to Not specified Comparable to Not specified Comparable to Not specified Not specified Not defined Obligation for Not specified Not specified Not specified No SAS covers be adjusted for the effects of dilutive IAS. IAS IAS (EASB, publicly traded this area, use options and all dilutive potential Earning Per companies to IAS. ordinary shares. Share). report diluted EPS was

The effects of ‘anti-dilutive’ potential introduced to ordinary shares (i.e. whose financial conversion would increase net profit statements for per share from continuing ordinary the financial year operations) are ignored in ended December calculating diluted EPS. 31, 1998.

Earnings to be adjusted for the after- Calculated after tax effects of: adjustment for • dividends and interest charged in new shares relation to dilutive potential issues, ordinary shares; and convertibles, options, warrants • any other changes in income that and other would result from the conversion circumstances of the potential ordinary shares. increasing the anticipated Number of ordinary shares to be number of adjusted for the number of shares shares. that would be issued on the conversion of all of the dilutive No precise potential ordinary shares into guidance for ordinary shares. Shares should be earnings and deemed to have been converted on number of shares the first date of the accounting adjustment period or the date of issue, if later. calculation. The assumed proceeds from these issues should be considered to have been received from the issue of shares at fair value. The difference between the number of shares issued and the number of shares that would have been issued at fair value should be treated as an issue of ordinary shares for no consideration.

Fair value for this purpose is calculated on the basis of the average price of the ordinary shares during the period.

Adjustment The weighted average number of Not specified Comparable to Not specified Comparable to Not specified Comparable to Not specified Not specified Not defined Not specified. Not specified Not specified Not specified No SAS covers for the entire shares outstanding during the period IAS. IAS IAS (EASB, this area, use period and of and for all periods presented should Earning Per IAS. comparatives be adjusted for events which change Share). the number of ordinary shares

outstanding without a corresponding change in resources e.g.:

• capitalization/bonus issue;

• bonus element of any other issue;

• share split; and

• consolidation of shares.

If these changes occur after the balance sheet date, the calculation of EPS should be based on the new number of shares, and the fact that

such adjustments have been made should be disclosed.

In addition, adjust all periods presented for:

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• prior period adjustments; and

• business combinations accounted for as an uniting of interests.

Do not restate diluted EPS for changes in the assumptions used or for the conversion of potential ordinary shares into ordinary shares outstanding.

Presentation Present basic and diluted EPS on Not specified In the notes to Not specified Comparable to Not specified EPS on the face Not specified Not specified Not defined Basic and diluted Not specified Not specified Not specified No SAS covers the face of the income and the financial IAS of income EPS should be this area, use expenditure account, with equal statements an statement (both presented on the IAS.

prominence. enterprise should interim and face of the disclose basic annual income and Both must be disclosed even if the and diluted accounts), with expenditure amounts disclosed are negative (i.e. earnings per equal account with a loss per share). share for each prominence. equal

class of ordinary prominence.

shares which Issuer being a have a different parent company right to share in and presenting the net profit for consolidated the period. report, shall present EPS on basis of consolidated financial statements.

Both EPS amounts are to be presented in spite of the financial results (net profit or loss).

Presentation Denominator to be used should be Not specified Not specified. Not specified Comparable to Not specified Comparable to Not specified Not specified Not defined Not specified. Not specified Not specified Not specified No SAS covers of additional determined in accordance with the IAS IAS (EASB this area, use EPS rules of the Standard. Earnings Per IAS. Share). If a component of net profit is used which is not reported as a line item in the income statement, a reconciliation should be provided between the component used and a line item in the income statement.

Basic and diluted per share amounts should be disclosed with equal prominence.

Disclosure Disclose: Not specified An enterprise Not specified Comparable to Not specified Comparable to Not specified Not specified Not defined Disclose Not specified Not specified Not specified No SAS covers should disclose IAS IAS (EASB additional this area, use • the amounts used as the in the notes to Earnings Per information IAS. numerators in calculating basic the financial Share). showing the way and diluted EPS, and a statements: of basic and reconciliation of those amounts to diluted EPS the profit or loss for the period; • the amounts calculation. and used as the numerators in • the weighted average number of calculating ordinary shares for both basic and basic and diluted, and a reconciliation of diluted EPS; those denominators to each other. and

Encouraged to disclose the • the weighted occurrence and nature of post-year- average end share transactions for which no number of adjustment is made e.g. post-year- ordinary end issues for cash. shares for both basic and

diluted EPS.

The enterprise

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may disclose earnings per share for various components of profit/(loss) for the period if this information will enable the users of the financial statements to better evaluate the performance of the enterprise.

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26. Interim Financial Reporting Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 34) Republic Macedonia

Scope of IAS 34 is effective for Not specified NAS 34 is No statutory Comparable to Czech accounting “Preparing and If an interim Not specified, Not defined No applicable Only year-end Issuance of Slovak accounting No SAS covers standard accounting periods beginning effective for requirement to IAS legislation does Issuing Interim financial refer to IAS regulations in the financial interim financial legislation does this area, use and on or after January 1, 1999. accounting prepare interim not specify Accounts” EASB statement is ‘Act’. statements are statements as at not specify IAS. effective Earlier application is periods beginning financial requirements for is in conformity required to be obligatory. June 30 is requirements for date encouraged. on or after statements for the interim financial with IAS 34. filed by law, as Requirements for mandatory as per interim financial Local regulations January 1, 1999. public’s use reporting. prerequisite for listed companies RAL. Such reporting. require IAS 34 does not mandate exists. Applies to all paying dividends are specified in reports have to be preparation of which enterprises should Enterprises Requirements for publicly listed in advance, such listing regulations. available no later This matter is financial publish interim financial should apply NAS The state listed companies enterprises. statement shall be Such companies than 30 days after regulated by the statements for the reports, how frequently or how 34 when the state companies and are specified by completed are required to the end of the Securities Law, length of one year Interim accounts soon after the end of an interim authorities require credit institutions the Prague Stock according to the prepare monthly, interim period. which requires only, which is must be provided period. Such matters will be presentation and produce interim Exchange. provisions quarterly and six- publicly traded equal to twelve on a quarterly decided by local regulators. publishing of financial reports pertaining to the month interim companies to months. The basis and must be The objective of IAS 34 is to interim financial for the regulatory annual financial reports. publish their business year authorized for specify the content of an statements. bodies only, on statement of the Timing of interim results in does not have to issuance, at the interim financial report quarterly and report prescribed publishing of compliance with coincide with the Publicly traded latest 2 months prepared in accordance with daily basis in the Accounting interim reports is IAS; i.e. all further calendar year. enterprises have after the interim IAS. respectively. Law. strictly regulated. points regarding There are no legal to provide interim balance sheet IAS apply. requirements The IASC encourages publicly financial reports Additionally, all date. regarding interim traded enterprises to provide that conform to Belarussian Financial reports reporting. interim financial reports that the recognition, entities should have to be conform to the recognition, measurement and present the tax published not measurement and disclosure disclosure returns for each later than 3 principles set out in IAS 34, at principles set out tax payable on months after the

least as of the end of the first in NAS 34, at monthly basis. end of the interim half of their financial year, such least as of the period. reports being made available end of the first not later than 60 days after the half of their end of the interim period. financial year, such reports being made

available not later than 60 days after the end of the interim period.

Minimum The following components: Not specified The following N/A Comparable to N/A Comparable to Same as annual Not specified, Not defined Six-month interim Only year-end The Ministry of Components of No SAS covers component components: IAS IAS (EASB financial refer to IAS report should financial Finance interim financial this area, use s • condensed balance sheet; Preparing and statements include all statements are established a reports are as IAS. • condensed • Issuing Interim elements required obligatory. format of interim required by IAS. condensed income balance sheet; Accounts). for annual reports financial statement; i.e.: statements which Additionally, the • condensed Securities Law • includes: condensed statement income • balance sheet, (“Law”) also showing either (i) all statement; • Balance sheet; requires changes in equity or (ii) • income disclosure of • changes in equity other than condensed statement, • Income information on those arising from capital statement statement; expected financial • transactions with owners showing all cash flow position of the • and distributions to owners; changes in statement, Selected enterprise in 6 equity; explanatory months following • condensed cash flow • statement of notes. the reporting statement; and • condensed changes in period and other cash flow equity, Management information. • selected explanatory notes. statement; and report has to be • notes to the attached to the • selected accounts. interim financial explanatory statements. notes. Limited contents of quarterly and monthly reports are specified in relevant listing regulations.

Form and If a complete set of financial Not specified The complete set N/A Comparable to N/A Comparable to Same as annual Not specified, Not defined. Six-month interim Not specified There is a Comparable to No SAS covers content statements is published in the of financial IAS IAS. financial refer to IAS report similar to a predefined format IAS. this area, use interim report, those financial statements statements complete set of of interim financial IAS. statements should be in full published in the Requirements for financial statements and compliance with IAS. interim report condensed statements. they have to be should be in full financial Basic and diluted compliant with If financial statements are compliance with statements are EPS should be RAL. condensed, they should NAS 1 not specified. disclosed. include at a minimum each of Presentation of Required in the headings and sub-totals Financial Contents and accordance with included in the most recent Statements. format of quarterly EASB Earnings annual financial statements and monthly per share (see and the explanatory notes If financial reports specified above) required by IAS 34. Additional statements are in relevant listing line items should be included if condensed, they regulations. their omission would make the should include at

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interim financial information should include at misleading. a minimum each of the headings

Basic and diluted EPS should and sub-totals be presented on the face of included in the the income statement. most recent annual financial

statements and the explanatory notes required by NAS 34. Additional line items should be included if their omission would make the interim financial information misleading.

Explanatory The following information Not specified Comparable to N/A Comparable to N/A Comparable to Same as annual Not specified, Not defined Six-month interim Not specified These disclosures Comparable to No SAS covers notes reported on financial year-to- IAS. IAS IAS financial refer to IAS reports should are not specified. IAS. this area, use required date basis: statements include the whole IAS. Additional notes spectrum of • a statement that accounting required for explanatory notes

policies are consistent with changes in off- as required in balance sheet those used in the annual annual reporting. account or, if those policies items occurring Auditors review have been changed, a after the last report should also description of the nature and balance sheet be attached to it. effect of the change; date and transactions and Explanatory notes • explanatory comments balances with required for about the seasonality or related parties as quarterly and cyclicality of interim per NAS 24. monthly reports: operations; • • information details of any items affecting about rules the financial statements that adopted for are unusual because of their preparation of nature, size or incidence; the report; • details of changes in • description of estimates of amounts events and reported in prior interim circumstances periods of the current having financial year or amounts significant reported in prior financial impact on years, if those changes have profit/loss a material effect in the realized; current interim period; • • provisions issuances, repurchases and adjustments repayments of debt and (including equity securities; deferred tax); • dividends paid (aggregate or • assets write- per share) separately for offs; ordinary and other shares; • where the enterprise falls For quarterly within the scope of IAS 14 reports (Revised) Segment additionally the Reporting, segment revenue following notes and segment result for should be business segments or included. geographical segments, • Specification of whichever is the enterprise’s shareholders primary basis of segment holding at least reporting; 5% of voting • material events subsequent rights at the to the end of the interim annual general period; meeting and changes since • the effects of changes in the last interim composition of the report; enterprise during the interim • period, including business Changes in combinations, acquisitions companies or disposals of subsidiaries shares holdings and long-term investments, by members of restructurings and management

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restructurings and and supervisory discontinuing operations; bodies; and • Explanatory • changes in contingent comments on liabilities or contingent major assets since the last annual achievement accounts. and events in the period, If the interim financial report is including those in compliance with IAS, that reported in fact should be disclosed. ongoing reports;

• Information about court or other administrative proceedings in respect of company’s and it’s subsidiaries’ liabilities or receivables equal or exceeding 10% of equity.

Periods for Interim financial statements Not specified Interim financial N/A Comparable to N/A Comparable to Only in the case Not specified, Not defined For six-month Not specified Interim financial Comparable to No SAS covers which (condensed or complete) are statements IAS IAS when the refer to IAS interim reports statements IAS. this area, use interim required for the following (condensed or company wants to comparable to (condensed) are IAS. financial periods: complete) are pay dividends in IAS except that required for the statements required for the advance during in comparative following periods: are required • balance sheet as of the end following periods: a year balance sheet to be of the current interim period and statement of • balance sheet presented and a comparative balance • balance sheet changes of equity as of the end of sheet as of the end of the as of the end of figures should be the current immediately preceding the current for corresponding interim period financial year; interim period half year and not and a and a comparative • for previous income statements of the comparative financial year. balance sheet current interim period and balance sheet as of the end of cumulatively for the current as of the end of For quarterly and the immediately financial year to date, with the immediately monthly reports preceding comparative income preceding applicable financial year; statements for the financial year statements for • comparable interim periods (December 31); relevant quarter income (current and year-to-date) of statements of • or month together the immediately preceding income with cumulative the current financial year; statement for figures should be interim period the current presented. and • statement showing changes interim period cumulatively for in equity cumulatively for the and income the current current financial year to statement for financial year to date, with a comparative the comparable date, with statement for the interim period comparative comparable year-to-date of the income period of the immediately immediately statements for preceding financial year; and preceding the comparable • financial year; interim periods Cash flow statement of the cumulatively for the current • statement immediately financial year to date, with a showing preceding comparative statement for changes in financial year. the comparable year-to-date equity for the period of the immediately current financial preceding financial year. year;

• cash flow statement for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year.

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Materiality Materiality should be assessed Not specified Materiality should N/A Comparable to N/A Comparable to Lower of 1% of Not specified, Not defined Not specified. Not specified Not applicable Comparable to No SAS covers in relation to the interim period be assessed in IAS IAS the total assets or refer to IAS IAS. this area, use financial data – allowing for the relation to the 500,000 IAS. greater reliance on estimates interim period Thousand HUF

inherent in interim financial data and measurements. not on the basis of estimated data at the end of the financial year.

Disclosure If an estimate of an amount Not specified If an estimate of N/A Comparable to N/A Comparable to Not specified, Not specified, Not defined Not specified. Not specified Not specified. Comparable to No SAS covers in annual reported in an interim period is an amount IAS IAS refer to IAS refer to IAS IAS. this area, use financial changed significantly during reported in an IAS. statements the final interim period of the interim period is financial year, but a separate changed financial report is not published significantly it can for that final interim period, the be adjusted for nature and amount of that the purposes of change in estimate should be the future interim disclosed in a note to the reports. annual financial statements for that year.

Recognition The same accounting policies Not specified Comparable to N/A Comparable to N/A Comparable to The interim Not specified, Not defined The same Not specified In practice the Comparable to No SAS covers and should be applied as are IAS. IAS IAS financial refer to IAS accounting same as per IAS. IAS. this area, use measureme applied in the enterprise’s statement shall be policies should be IAS. nt annual financial statements, completed on the applied as are Treatment of

except for policy changes basis of analytical applied in the costs incurred unevenly during made after the date of the and enterprise’s most recent annual financial records for the annual financial the year is not statements that are to be accounting date statements. specified. reflected in the next annual specified by the Income tax is financial statements. entrepreneur, in Income tax calculated based observation of the expense should on actual results Measurements for interim regulations on the be recognized of operation up to reporting purposes should be end of the year based on the the end of interim made on a year-to-date basis, assessment of actual net income accounting so that the frequency of the balance sheet for the interim period. enterprise's reporting (annual, items, backed up period as if it was half-yearly or quarterly) does by a profit and the full fiscal year. not affect the measurement of loss statement its annual results. and an inventory, and in a manner Revenues that are received as to be seasonally, cyclically or controlled occasionally within a financial subsequently. year should not be anticipated or deferred as of the interim The inventory date, if anticipation or deferral shall include the would not be appropriate at the data, from the end of the financial year. analytical and ledger records, on Costs that are incurred assets and unevenly during a financial sources for the year should be anticipated or accounting date deferred for interim reporting of the financial purposes if, and only if, it is statement, and also appropriate to anticipate any adjustments or defer that type of cost at the to be applied end of the financial year. during the end of Income tax expenses should the year be recognized based on the assessment along best estimate of the weighted with the average annual income tax calculations in rate expected for the full support of such financial year. corrections.

Relative to the accounting date of the interim financial statement, the analytical and ledger records may not be closed, as they are to be continued without interruption. The adjustments,

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pertaining to the assessment of balance sheet items may not be included in the analytical and ledger records, as such adjustments may be considered for the interim financial statement only.

Restatemen Changes in accounting policy, Not specified Not specified. Not specified. Comparable to N/A Comparable to Not specified Not specified, Not defined Figures for the Not specified Not specified. Comparable to No SAS covers t of other than one for which the IAS IAS refer to IAS corresponding IAS. this area, use previously transition is specified by a new period should be IAS. reported IAS, should be reflected either restated in order interim by restating prior interim that they are periods periods of the current year and comparable and the comparable interim periods consistent with of prior financial years (if the current periods enterprise follows the presentation benchmark treatment under (applicable only IAS 8) or restating the financial for publicly traded statements of prior interim companies for periods of the current financial which interim year (if the alternative reporting treatment under IAS 8 if regulations are followed). relevant).

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27. Discontinuing Operations Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 35) Republic Macedonia

Scope and IAS 35 is effective for accounting Not specified. Comparable to Not specified Comparable to Not specified Not specified, but Not specified. Not specified, Not defined. Not specified Not specified. Not specified. Not specified, but No SAS covers effective date periods beginning on or after IAS. IAS in practice refer to IAS application similar this area, use January 1, 1999. Earlier comparable to to IAS 35 is IAS.

application is encouraged. IAS 35. possible.

IAS 35 is a presentation and disclosure Standard and does not establish any new principles for the measurement or recognition of income, expenses, assets or liabilities of discontinuing operations.

This Standard applies to discontinuing operations in all enterprises.

Definitions A discontinuing operation is a Not specified. Comparable to Not specified Comparable to Not specified Not specified. Not specified. Not specified, Not defined. Not specified. Not specified. Not specified. Not specified No SAS covers relatively large component of an IAS. IAS refer to IAS. this area, use enterprise: IAS.

• that the enterprise pursuant to a single plan is disposing of in its entirety or piecemeal by selling off its assets and settling its liabilities;

Note. To qualify as a discontinuing operation, the disposal must be pursuant to a single coordinated plan.

• that represents a separate major line of business or geographic area of operations; and in line with the definitions in IAS 14, Segment Reporting.

• that can be distinguished operationally and for financial reporting purposes.

Note. This assumes that assets, liabilities, income and expenses are directly attributable to the component and would be eliminated when the component is sold, abandoned or otherwise disposed of.

Classifying a component of an enterprise, as discontinuing does not, in itself, bring into question the enterprise’s ability to continue as a going concern.

Note. Uncertainties relating to the going concern presumption shall be disclosed in accordance with IAS 1, Presentation of Financial Statements.

A restructuring or other event that does not meet the above definition of a discontinuing operation shall not be referred to as such.

Initial When Not specified. The earlier of: Not specified Comparable to Not specified Not specified. Not specified. Not specified, Not specified. Not specified. Not specified. Not specified. Not specified No SAS covers disclosure IAS refer to IAS. this area, use event IAS. • the enterprise has entered into • the enterprise a binding sale agreement for having entered substantially all of the assets

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substantially all of the assets into a binding attributable to the discontinuing sale agreement operation; or for substantially all of the assets • the enterprise’s board of attributable to directors or similar governing the body has both approved and discontinuing announced a detailed formal operation; or plan. • the enterprise’s Board of directors has both approved and announced a detailed formal plan.

Recognition The assets, liabilities, income and Not specified. An enterprise Not specified Comparable to Not specified Comparable to Not specified. Not specified, Not defined. No specific rules Not specified. All of them are Not specified No SAS covers and expenses of the discontinuing should apply the IAS IAS. refer to IAS stated for the measured in this area, use measurement operation are measured and principles of recognition and accordance with IAS. recognized in accordance with the recognition and measurement of principles set out principles set out in other IASC measurement liabilities, income in RAL. standards. that are set out in and expenses of the Accountancy the discontinuing Act and other operation. A discontinuing operation is a NAS for the restructuring as defined in IAS 37, purpose of Treatment of Provisions. A restructuring deciding when restructuring provision is recognized, if only if, and how to provisions not recognize and specifically • the measurement criteria in IAS measure the addressed, 37 are satisfied; and changes in therefore general assets and rules for • the initial disclosure event liabilities and the provisions apply. occurred on or before the income, balance sheet date. expenses, and If discontinuance cash flows of operation relating to a indicates that any The approval and announcement discontinuing assets are of a plan for discontinuance may operation. impaired, indicate that the assets of the unplanned discontinuing operation are depreciation impaired. In accordance with IAS charges should 36, Impairment of Assets, the be made to bring recoverable amount of each asset the assets’ net (higher of the asset’s net selling book value down price and value in use) is to their net sales estimated and any impairment value. losses or reversals are recognized.

If the discontinuing operation is to be sold substantially in its entirety, recoverable amount is determined for the discontinuing operation (cash-generating unit) as a whole. Any impairment loss is allocated first to reduce the carrying amount of any goodwill and then to other assets on a pro-rata basis based on the carrying amount of each asset in the unit (IAS 36, 88).

If the discontinuing operation is disposed of in other ways such as piecemeal sales or abandonment, the recoverable amount is determined for individual assets.

Note. A price in a binding sale agreement is the best evidence of an assets (cash-generating unit’s) net selling price or estimated cash inflow.

Disclosures In the period in which the initial Not specified. Following initial Not specified Comparable to Not specified Not specified. Not specified. Not specified, Not defined. Information about Not specified. Not specified. Not specified No SAS covers in financial disclosure event occurs up until disclosure event: IAS refer to IAS. revenue, this area, use statements the period in which the expenses and IAS. discontinuance is completed or • a description of profit/loss on

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abandoned: the operations discontinuing discontinued in operation; the period or • a description of the planned to be discontinuing operation; • the date and discontinued in nature of the • the business or geographic the following initial segment(s) in which it is period should be disclosure reported in accordance with IAS disclosed. event; 14, Segment Reporting; • the date or • the date and nature of the initial period in which disclosure event; the • the date or period in which the discontinuance discontinuance is expected to is expected to be completed if known or be completed if determinable; known or determinable; • the carrying amount, as of the • balance sheet date, of the total the carrying assets and liabilities to be amount, as of disposed of; the balance sheet date, of • revenue, expenses, and pre-tax the total assets profit or loss from ordinary and liabilities to activities attributable to the be disposed of; discontinuing operation during • the current financial period and revenue, income tax expense relating expenses, and thereto (IAS 12, 81(h)) pre-tax profit or loss from • net cash flows attributable to ordinary the operating, investing, and activities financing activities of the attributable to discontinuing operation during the the current reporting period discontinuing operation • any significant changes in the during the amount or timing of cash flows current relating to the assets and financial period liabilities to be disposed of or and income tax settled in subsequent periods expense relating thereto If the initial disclosure event (IAS 12, 81(h)) occurs between the balance sheet date and the date when the • net cash flows financial statements are attributable to authorized for use, the event is a the operating, non-adjusting event in accordance investing and with IAS 10, Events After the financing Balance Sheet Date (effective activities of the date January 1, 2000). However, discontinuing IAS 35 requires disclosure of the operation information specified above and during the IAS 10 requires that an estimate current of the financial effect or a reporting statement that such an estimate period. cannot be made be disclosed. If the initial disclosure event If the enterprise has disposed of occurs between assets or settled liabilities the balance sheet attributable to the discontinuing date and the date operation during the current when the period, disclosure is made for any financial pre-tax gain or loss and any statements are income tax expense related to authorized for these items as required by IAS 12 use, the event is paragraph 81(h) regardless of a non-adjusting whether the initial disclose event event in occurred, before, on or after the accordance with balance sheet date and the NAS 10, Events approval date. After the Balance Sheet Date. When the enterprise enters into a binding sales agreement before, If the enterprise on after the balance sheet date, has disposed of IAS 35 requires disclosure of the assets or settled net selling price or range of prices liabilities (after deducting expected disposal attributable to the costs), carrying amounts of the discontinuing net assets to be sold and the operation during expected timing of receipt of these the current

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expected timing of receipt of these period, disclosure cash flows. is made for any pre-tax gain or loss and any

income tax expense related to these items.

When the enterprise enters into a binding sales agreement before, on after the balance sheet date, NAS 35 requires disclosure of the net selling price or range of prices (after deducting expected disposal costs), carrying amounts of the net assets to be sold and the expected timing of receipt of these cash flows.

Presentation The disclosures required may be Not specified. Any disclosure Not specified Comparable to Not specified Not specified. Not specified, Not defined. The disclosures Not specified. Not specified. Disclosure on the No SAS covers of disclosures presented either in the notes or on specified above IAS refer to IAS. required should face of financial this area, use the face of the financial should be be made in the statements is not IAS. statements except that pre-tax presented notes. allowed due to gains or losses recognized on the separately for their prescribed disposal of assets or settlement of each format, therefore The effect of liabilities attributable to the discontinuing only disclosure in discontinuance or discontinuing operation should be operation. the footnotes is suspension of a shown on the face of the income possible. certain type of statement. activity (including a significant No item recognized in conjunction change in with the discontinuing operation production should be presented as an methods or a sale extraordinary item. of an organized part of an entity) is presented as Comparative information for prior an extraordinary periods presented subsequent to item. the initial disclosure event should be restated to segregate continuing and discontinuing assets, liabilities, income and expenses.

The notes to an interim financial report should describe significant events and activities relating to the discontinuing operation and any significant changes in the amount or timing of cash flows from the disposal of assets or settlement of liabilities.

Note. This is consistent with the disclosure requirements in IAS 34, Interim Financial Reporting.

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28. Impairment of Assets Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 36) Republic Macedonia

Scope and IAS 36 is operative for Not specified. No statutory rules No statutory rules Comparable to Accounting Act Comparable to HAS is effective Not specified, Not defined. Not specified Comparable to Romanian No special No SAS covers effective accounting periods beginning exist in this area. in this area exist. IAS Section 26 and IAS. from 1992, as the refer to IAS. IAS Accounting Law regulation exists, this area, use date on or after July 1, 1999. Accounting Accounting Law is specifies that but the standard IAS. Earlier application is Procedures for effective from that provisions should may be applied as encouraged. However, this Businessmen. time. be made for any guidance for

Standard should be applied on assets that have estimating Prudence Invested assets a prospective basis only. been impaired. impairment principle to be and current provisions for IAS 36 prescribes the applied. assets shall be various categories accounting and disclosure for evaluated at the of assets under

impairment of all assets and purchase and/or the prudence replaces the requirements for manufacturing principle. assessing the recoverability of cost less the an asset previously found in write-offs applied. the following standards: Assets may not IAS 16, Property, Plant, be entered in the Equipment (revised 1998); balance sheet at a value higher

IAS 22, Business than the purchase Combinations (revised 1998); and/or

manufacturing IAS 28, Accounting for costs. Investments in Associates (revised 1998); Not specified.

IAS 31, Financial Reporting for Not specified. Joint Ventures (revised 1998). Not specified. IAS 36 does not cover impairment of inventories (see IAS 2), deferred tax assets (see IAS 12), assets arising Not specified. from construction contracts

(see IAS 11), assets arising from employee benefits and financial assets included in the scope of IAS 32, Financial Instruments: Disclosure and Presentation.

This Standard applies to Same investments in subsidiaries,

associates or joint ventures as defined in other standards which are financial assets but excluded from the scope of IAS 32.

Definitions Recoverable amount - the Not specified. No statutory rules No statutory rules Comparable to Net selling price is The detailed Same Not specified, Not defined. Net selling price – Comparable to Not specified. As above. No SAS covers higher of an asset’s net selling exist in this area. in this area exist. IAS the amount guidance refer to IAS the amount IAS. this area, use price and its value in use. obtainable from regarding Assets may not obtainable from IAS. the sale of an measurement be entered in the the sale of the

Value in use - the present asset in an arm’s found in IAS 36 balance sheet at asset at the value of estimated future cash a value higher length may be applied. balance sheet flows expected to arise from transaction, less than the purchase date (less VAT the continuing use of an asset the costs of and/or payable) less and from its disposal at the disposal. manufacturing trade and cash end of its useful life. costs. discounts, excise Costs of disposal duty and costs to Net selling price is the amount Same - incremental be incurred to obtainable from the sale of an costs directly bring the item to a asset in an arm’s length attributable to the sellable condition transaction, less the costs of disposal of an plus any disposal. asset. subsidies Same receivable. Costs of disposal - incremental costs directly attributable to the If it is not possible disposal of an asset, excluding to determine the finance costs and income tax net sales value of expense. a given asset, its A cash-generating unit - the estimate net smallest identifiable group of Not specified. market value at assets that generates cash the balance sheet

inflows from continuing use date should be established and that are largely independent of Assets are all used. the cash inflows from other resources assets or groups of assets. controlled by the Other categories enterprise at a Corporate assets - assets Not specified. specified in IAS specific date. other than goodwill that are not defined contribute to the future cash and used for

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contribute to the future cash asset valuation flows of both the cash- An active market purposes. generating unit under review – a market in

and other cash-generating which a market value can be units. Same evaluated. An active market - a market where all the following conditions exist:

• the items traded are

homogenous;

• willing buyers and sellers can normally be found at any time;

• prices are available to the public.

Identifying An asset (individual or cash- Not specified. No statutory rules No statutory rules Comparable to Comparable to The detailed Same Comparable to Not defined. All assets should Comparable to Not specified. As above. No SAS covers an assets generating unit) is impaired exist in this area. in this area exist. IAS IAS. guidance IAS. be assessed at IAS. this area, use that may be when its carrying amount regarding each balance IAS. impaired exceeds its recoverable measurement sheet date.

amount. found in IAS 36 Carrying amounts may be applied. All assets should be assessed of fixed assets at each balance sheet date. A Same and intangible formal estimate of the assets should be recoverable amount is required reduced to their if there is any indication of a net sales values potential impairment / loss. If in case of: no indication is present, no

formal estimate is required. • production Same technology Note. If previous calculations changes; show that the asset’s recoverable amount is • decision about significantly greater than its their liquidation carrying amount and there is or withdrawal nothing to indicate any adverse from use; changes, no re-estimate is • required. any other causes Same The following indications indicating a should be considered: permanent loss in the asset’s • External sources of Same economic information usefulness. Same • the asset’s market value has Carrying values of declined significantly more long-term than expected; investments Same should be • significant changes in the reduced to reflect technological, market, their permanent economic or legal diminution in environment with an adverse value. effect on the enterprise have occurred during the period or are expect to occur in the near future;

• an increase in market NOT SPECIFIED. interest rates or other market rates of return which are likely to effect the discount rate used in calculating an assets value in use (decreases recoverable amount);

• Note. Assets, with a long NOT SPECIFIED. remaining useful life may be insensitive to changes in short-term market rates. Even if the discount rate is affected the recoverable amount might be unaffected as an enterprise can demonstrate that it adjusts its revenues for these increases. Only at

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consolidation • The carrying amount of the net assets of the reporting enterprise is more than its market capitalization; Same

• Internal sources of information Same • evidence of obsolescence or physical damage is available; Same

• significant changes with an adverse effect have occurred or are expected to occur in the near future.

These include plans to discontinue or restructure the operation to which an asset belongs or dispose of an asset before the previously expected date;

• evidence from internal NOT SPECIFIED. reporting indicates that the economic performance of an asset is, or will be, worse that previously expected NOT SPECIFIED. • cash flows for acquiring, operating or maintaining the asset are significantly higher than budgeted NOT SPECIFIED. • actual net cash flows or operating profit or loss are significantly worse than budgeted

• a significant decline in NOT SPECIFIED. budgeted net cash flows or operating profit, or increase in budgeted loss from the

asset NOT SPECIFIED. • operating losses or net cash outflows are expected (budgeted data) for the asset during ensuing periods

Note. An indication of impairment may indicate that the remaining useful life, depreciation (amortization) method or the residual life for the asset need to be reviewed and adjusted, even if no impairment loss is recognized.

Measureme Recoverable amount is the Not specified. No statutory rules No statutory rules Comparable to Adjustment to Comparable to Same Comparable to Not defined. Not specified – Comparable to Not specified. As above. No SAS covers nt of higher of an asset’s net selling exist in this area. in this area exist. IAS assets is made IAS. IAS. category of IAS. this area, use recoverable price and value in use. If either when their value recoverable IAS. amount of these amounts exceeds the as ascertained amount not

asset’s carrying value the other during the defined and used amount need not be estimated. inventory taking is for assets lower than their valuation Estimates, averages and net book value, External experts purposes. computational shortcuts may and when this are required for provide a reasonable decrease in value estimating market approximation of the detailed cannot be value of assets. computations for determining considered net selling price or value in use temporary. in this Standard and may be applied.

The recoverable amount of an Same asset held for disposal is its

net selling price.

Recoverable amount is determined for an individual NOT SPECIFIED. asset, unless the asset does

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not generate cash inflows that are largely independent of those from other assets of groups of assets. If this is the case the recoverable amount is determined for the cash- generating unit to which the asset belongs unless:

• the assets net selling price is higher than its carrying amount; or

the assets value in use is close to its net selling price and net selling price can be determined.

Net selling The best evidence of an Not specified. No statutory rules No statutory rules Comparable to Comparable to The detailed Same Not defined. The amount that Comparable to Not specified. As above. No SAS covers price asset’s net selling price is its exist in this area. in this area exist. IAS IAS guidance can be obtained IAS this area, use price in a binding sale regarding from the sale of IAS. agreement. measurement the asset at the

found in IAS 36 balance sheet If there is no sale agreement may be applied. Same date (less VAT but the asset is traded on an payable) less active market, the best trade and cash evidence of net selling price is discounts, excise its market value less the costs duty and costs to of disposal. be incurred to

bring the item to a If there is no sale agreement sellable condition and no active market, net NOT SPECIFIED. plus any selling price is based on the subsidies best information available receivable. regarding similar arm-length transactions. Forced sale If the asset is prices are only used when traded on an management is compelled to active market, its

sell. market value may be used as an Costs of disposal are direct Same indicator of the incremental costs to dispose of sales price. an asset. Termination costs and costs associated with Costs of disposal reorganizing the business after generally defined the disposal of the asset are as costs to be not direct incremental costs of incurred to bring disposal. the asset to a sellable condition and to effect the sale. No detailed guidance on components of such costs is provided.

Value in Estimating value in use Not specified. No statutory rules No statutory rules Comparable to Not specified Comparable to The purchase Not defined. Not specified – Comparable to Not specified. As above. No SAS covers use involves: exist in this area. in this area exist. IAS IAS. cost (purchase category of value IAS. this area, use price) is the in use not defined IAS. • estimating the future cash expenditure which and used for inflows and outflows to be is incurred in the assets valuation derived from continuing use interest of the purposes. and ultimate disposal; acquisition, • establishment or applying the appropriate putting into discount rate to these future operation of the cash flows. assets before the • Future cash flow projections putting into should based on; operation or delivery thereof to • reasonable assumptions that the individual management’s best estimate asset items. The of the conditions that will purchase price exist over the remaining includes the useful life of the asset; purchase price reduced by any • on the most recent discounts and /forecasts approved increased by any by management for a extra charges, the maximum period of 5 years; costs of intermediaries • a steady or declining growth related to

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rate for subsequent years, delivery, loading, which is used to extrapolate foundation, projections until the end of installation, the asset’s useful life. putting into operation and purchase, any agency

commission, as well as the taxes (the excise tax paid at purchase) and customs duties (levies, customs surtaxes,

customs clearance fees) related to the purchase.

Estimates of future cash flows NOT SPECIFIED. should include

projections of cash inflows from the continuing use of the asset:

• projections of cash outflows

incurred to generate cash inflows from the continuing use of the asset;

• Future cash flows should be estimated for the asset in its current condition on a pre- tax basis. Future capital expenditures necessary to maintain or sustain an asset at its original performance level are included (see b above).

Note. If an asset is not yet ready for use or sale, future cash outflows that are NOT SPECIFIED. expected to be incurred before the asset is ready for use or sale are included.

• Net cash flows to be received (or paid) for the disposal of the asset at the end of its useful life.

• The estimate of net cash

flows to be received for the disposal of an asset at the end of its useful life should be its net selling price less costs of disposal prevailing at the date of the estimate.

Note. These prices may be adjusted for inflation and

specific future price increases. However, if estimates of future cash flows and the discount rate exclude the effect of general inflation, this effect is also excluded from the estimates of net cash flows on

disposal. NOT SPECIFIED. Estimates of future cash flows should not include cash flows expected to arise from:

• A future restructuring to

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which the enterprise is not committed;

• Future capital expenditure that will improve or enhance the asset in excess of its originally assessed standard of performance;

• Cash inflows or outflows from financing activities; or

• Income tax receipts or payments

Discount The discount rate should be a Not specified. No statutory rules No statutory rules Comparable to Not specified Comparable to Not specified. Not specified, Not defined. Not applicable. Comparable to Not specified. As above. No SAS covers rate pre-tax rate (rates) that reflect exist in this area. in this area exist. IAS IAS. refer to IAS. Since the IAS. this area, use current market assessment of category of value IAS. the time value of money in use or a similar independent of the enterprises one is not defined capital structure. The discount in the ‘Act’. No rate should not reflect risks for discounting used which future cash flow in practice. estimates have been adjusted.

The rate is estimated from

• The rate explicit in current market transactions for similar assets; or

• The weighted average cost of capital of a listed enterprise that has a single asset (or portfolio of assets) similar in terms of service potential and risks to the assets under review.

The enterprise may initially take into account:

• Its weighted average cost of capital using techniques such as the Capital Asset Pricing Model;

• The enterprises incremental borrowing rate;

• Other market borrowing rates.

These rates are then adjusted for the way the market would assess the specific risks associated with the projected cash flows and to exclude risks which are not relevant.

Recognition If the recoverable amount of an Not specified. No statutory rules No statutory rules Comparable to Adjustments to Comparable to Same as IAS, Comparable to Not defined. In circumstances Comparable to AS per IAS. As above. No SAS covers and asset is less than its carrying exist in this area. in this area exist. IAS assets should be IAS. (EAL §28 called IAS. where an IAS, except for Provision is made this area, use measureme amount, the carrying amount is created only for and §31, EASB “extraordinary impairment loss deferred tax for impairment in IAS. nt reduced to the recoverable assets when there Nr. 6 “Balance depreciation”. has occurred, the assets. value of assets. amount and an impairment is a decrease in Sheet Accounts” asset’s carrying loss is recognized. their accounting sections 8 and 9 value should be value. and EASB Nr. reduced to its net

An impairment loss on a 9,”Equity sales value (fixed revealed asset is treated as a These Method”.) NOT SPECIFIED. assets and revaluation decrease. If the adjustments shall intangibles) or a loss exceeds the revaluation be created only relevant write off surplus the remaining amount where the reflecting its is recognized as an expense. decrease in the permanent asset value is not diminution in If the impairment loss is temporary. value (long term greater than the carrying investments and amount of the asset a liability When there is a NOT SPECIFIED. other assets) is recognized only if required permanent should be made. by another Standard. decrease in the asset value, the Impairment losses If an impairment loss is decrease shall be resulting from recognized, any related debited to NOT SPECIFIED. events of fate, deferred tax assets or liabilities expenses or, in discontinuance or are determined under IAS 12, the case of suspension of Income Taxes. tangible and certain types of

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tangible and certain types of intangible fixed activity should be assets, an treated as extraordinary extraordinary write-off shall be items. Other made, and the losses are depreciation charged to other policy adjusted operating accordingly. expenses.

The treatment of impairment losses in excess of the carrying amount of the asset is not directly addressed. In practice liabilities are recognized in such circumstances.

Relevant deferred tax should be determined in connection with the impairment losses recognized.

Cash Recoverable amount should be Not specified. No statutory rules No statutory rules Comparable to Not specified Comparable to Not specified. Not specified, Not defined. Not applicable – Comparable to Not specified. As above. No SAS covers generating estimated for the individual exist in this area. in this area exist. IAS IAS. refer to IAS category of cash IAS. this area, use units asset. If this is not possible the generating units IAS. enterprise should determine not defined and the recoverable amount of the used for assets cash-generating unit to which valuation the asset belongs. purposes.

The recoverable amount of an individual asset cannot be determined if:

The asset’s value in use cannot be estimated to be close to its net selling price (for example when future cash flows from continuing use cannot be estimated to be negligible while the asset’s net selling value equals scrap value); and

The asset does not generate cash inflows that are independent of those from other assets (for example if the output of an asset or group of assets are used internally).

Note. If net selling price or value in use is determinable and greater than the carrying amount, this procedure is redundant.

If an active market exists for the output produced by an asset (group of assets), this asset or group of assets should be identified as a cash- generating unit, even if some of the output is used internally.

Recoverabl The carrying amount of a cash- Not specified. No statutory rules No statutory rules Comparable to Not specified Not specified, but Not specified. Not specified, Not defined. Not applicable. Not specified Not specified. As above. No SAS covers e amount generating unit: exist in this area. in this area exist. IAS in practice refer to IAS this area, use and comparable to IAS. carrying Includes the carrying amount IAS. amount of a of all the assets that can be cash- attributed directly, or allocated generating on a reasonable and unit consistent basis to the unit;

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Does not include the carrying amount of any liability, unless the recoverable amount cannot be determined without considering the liability.

Note. A liability is considered if for example the buyer would be required to take over a liability on disposal. Net selling price would be the estimated selling price for the assets and the “sold” liability less disposal costs.

The net selling price and value in use of a cash-generating unit exclude assets that are not a part of the unit and liabilities that have already been recognized in the financial statements.

Goodwill As goodwill does not generate Not specified. No statutory rules No statutory rules Comparable to Not specified Not specified, but The purchase Not specified, Not defined. Goodwill should Not specified Not specified, but As above. No SAS covers cash flows independently from exist in this area. in this area exist. IAS in practice price of goodwill refer to IAS be assessed for in practice this area, use other assets or groups of comparable to is the difference impairment at comparable to IAS. assets the recoverable amount IAS. between the each balance IAS. of goodwill as an individual consideration paid sheet date asset cannot be determined. for the business according to If there is or company general rules. indication that If there is an indication that purchased, and goodwill is goodwill is impaired, the value, When economic impaired, it is recoverable amount is established usefulness of written-down. determined for the cash- according to the goodwill is lost, it generating unit to which evaluation defined should be written goodwill belongs. in this Act, of the off by means of assets of the an unplanned The enterprise performs the business or depreciation “bottom-up” test by company charge. Identifying whether goodwill purchased, less can be allocated to the unit on the liabilities, if a reasonable basis; and the consideration paid is higher. Comparing the recoverable amount of the cash-generating unit to its carrying amount The purchase (including allocated goodwill) price of goodwill and recognizing any may be written off impairment loss. over a period of 5 If goodwill could not be years or more, but allocated on a reasonable up to a period of basis to the unit under review, 15 years. Should the enterprise performs the an entrepreneur “top-down” test by decide to write off goodwill over a Identifying the smallest cash- period of more generating unit that includes than 5 years, it the unit under review and to shall be explained which goodwill can be in the allocated on a reasonable supplementary basis; and appendix.

Compares the recoverable amount of the larger unit with its carrying value and recognizes any impairment loss

The “bottom-up” test ensures that any impairment loss for the smaller cash-generating unit has been determined. The “top-down” test then identifies the impairment loss related to the goodwill allocated to the larger unit.

Corporate Because corporate assets Not specified. No statutory rules No statutory rules Comparable to Not specified Not specified, but Not specified. Not specified, Not defined. Corporate assets Not specified Not specified. As above. No SAS covers assets cannot generate separate cash exist in this area. in this area exist. IAS in practice refer to IAS are treated as any this area, use inflows, the recoverable comparable to other assets and IAS.

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amount of an individual IAS. assessed for corporate asset cannot be impairment (if determined unless applicable) management has decided to individually. dispose of the asset.

In testing a cash-generating unit for impairment all corporate assets should be identified.

If the carrying amount of the corporate asset can be allocated to the cash- generating unit under review on a reasonable basis, only the “bottom-up” test is applied

If the corporate asset cannot be allocated, both the “bottom- up” and “top-down” tests should be applied.

Impairment The impairment loss should be Not specified. No statutory rules No statutory rules Comparable to Not specified Not specified, but Not specified. Not specified, Not defined. Not applicable in Not specified. Not specified. As above. No SAS covers loss for a allocated to reduce the exist in this area. in this area exist. IAS in practice refer to IAS. the context of this area, use cash- carrying amounts of the assets comparable to cash generating IAS. generating of the unit in the following IAS. units. unit order: In practice when a • First to goodwill; and selling price is determined for a • To other assets on a pro- group of assets rata basis based on the (e.g. in a sale of carrying amount of each an organized part asset in the unit of the entity), any loss arising from The carrying amount of an the transaction is asset should not be reduced apportioned to below the higher of: assets intended to • Net selling price; be disposed of on a pro-rata basis. • Its value in use

• Zero.

If the recoverable amount of an individual asset cannot be determined:

An impairment loss is recognized if its carrying amount is greater than the higher of the values shown above;

No impairment loss is recognized if the related cash- generating unit is not impaired even if the asset’s net selling price is less than its carrying amount.

Reversal of An enterprise should assess Not specified. No statutory rules No statutory rules Comparable to An adjustment to Not specified, but NOT SPECIFIED. Not specified, Not defined. Not specified. Not specified. Not specified. As above. No SAS covers an whether a previously exist in this area. in this area exist. IAS assets shall be in practice refer to IAS. this area, use impairment recognized impairment loss reduced or comparable to Only revaluation IAS. loss may no longer exist or may cancelled by a IAS. is accepted if

have decreased. A formal credit entry to performed by an external expert, estimate of recoverable revenues when amount is required if there is inventory taking in but it has no any indication of a reversal. the next period effect on the profit does not provide and loss account. The following indications evidence

should be considered: substantiating

their amount. • External sources of

information Not specified, but • in practice The asset’s market value comparable to has increased significantly IAS during the period;

• Significant changes in the technological, market, economic or legal

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environment with a favorable effect on the enterprise have occurred during the period

or are expect to occur in the near future;

• An decrease in market interest rates or other market rates of return which are likely to effect the discount rate used in calculating an assets value in use (increases recoverable amount);

• Internal sources of information

• Evidence of obsolescence or physical damage is available;

• Significant changes with a favorable effect have occurred or are expected to occur in the near future. These include capital expenditures that have incurred during the period to improve or enhance an asset in excess of its originally assessed standard of performance or a commitment to discontinue or restructure the operation to which the asset belongs; and

• Evidence from internal reporting indicates that the economic performance of an asset is, or will be, better than previously expected.

A reversal of an impairment loss reflects an increase in the estimated service potential of an asset, either from use or sale.

An asset’s value may become greater than its carrying amount because the present value of future cash flows increase as they come closer. As the service potential of the asset has not increased, the impairment loss is not reversed because of the passage of time.

Reversal of The increased carrying amount Not specified. No statutory rules No statutory rules Comparable to Adjustments to Comparable to See above Comparable to Not defined. Not specified. Not specified. Not specified. As above. No SAS covers impairment of an asset due to a reversal of exist in this area. in this area exist. IAS assets shall be IAS perEAL §28 IAS. this area, use loss on an impairment loss should not reduced or and §31, EASB Reversal of an IAS. individual exceed the carrying amount cancelled by a nr. 6 “Balance impairment loss is asset that would have been credit entry to Sheet Accounts” recognized as income. determined (net of amortization revenues when sections 8 and 9 or depreciation) had no inventory taking in and EASB nr.

impairment loss been the next period 9,”Equity recognized in prior years. does not provide Method”. evidence A reversal of an impairment substantiating loss is recognized as income, their amount. unless the asset is carried at revealed amount under Adjustments shall another Standard. Any reversal not have a debit of an impairment loss taken to balance. revaluation surplus shall be recognized as a revaluation The creation of an increase. adjustment in order to increase the value of an asset is prohibited

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Reversal of A reversal of an impairment Not specified. No statutory rules No statutory rules Comparable to Not specified Comparable to Not specified. Not specified, Not defined. Not applicable – Comparable to Not specified. As above. No SAS covers an loss for a cash-generating unit exist in this area. in this area exist. IAS IAS. refer to IAS. impairment losses IAS. this area, use impairment is allocated in the following are recognized for IAS. loss for a order: cash generating cash- units. generating • First, to assets other than unit goodwill on a pro-rata basis based on the carrying amount of each asset;

• To goodwill, if the following criteria are met:

• The impairment loss was caused by a specific external event not expected to occur; and

• Subsequent external events have occurred that reverse the effect of that event.

• The carrying amounts of assets should not be increased above the lower of:

• Its recoverable amount;

• Its carrying amount that would have been determined (net of depreciation and amortization) had no loss been recognized.

Disclosure For each class of assets, the Not specified. No statutory rules No statutory rules Comparable to Specification by Impairment losses The purchase or Impairment losses Not defined. Major categories Not specified. The movement in Not specified No SAS covers financial statements should exist in this area. in this area exist. IAS individual groups and reversals, manufacturing and reversals, of decreases in the provision this area, use disclose: with separate their amounts, costs (purchase their amounts, the carrying value made for IAS. disclosure of nature and price and/or direct nature and of fixed assets, impairment in • The amount of impairment acquisition cost reasons for manufacturing reasons for intangibles and value is disclosed. losses and reversals and related recognition must costs) of recognition must long-term recognized in the income accumulated be disclosed intangible assets be disclosed investments No further statement and the line items depreciation and under EAL. and tangible under EAL. should be disclosure affected. adjustments assets, shall be disclosed in the requirement specified. • provided. distributed over relevant required The amount of impairment the years in which statements of losses and reversals such assets are movements. recognized in equity. expected to be Additionally An enterprise that applies IAS used (accounting for depreciation). amount and 14, Segment reporting, should reasons for disclose the amount of unplanned impairment losses and depreciation reversals recognized in the The ratio of the charges (also income statement or directly in annual resulting from equity. depreciation to be recognized accounted for to If impairment losses and impairment the purchase and losses) should be reversals are material, an manufacturing enterprise should disclose: disclosed in the costs (gross notes. • The events and value), or to the circumstances that led to the net value or the recognition or reversal of the performance- impairment loss; proportionate amount of the • Amount of the loss purchase and recognized or reversed; manufacturing costs, and the • For an individual asset; absolute amount of depreciation • the nature of the asset and shall be planned the reportable segment to with regard to the which it belongs expected use of the individual • for a cash-generating unit; asset, its duration • a description of the cash- arising therefrom, generating unit (such as its physical whether it is a product line, wearing out and plant or reportable segment; moral obsolescence, as • the amount of the loss or well as to the reversal recognized by class circumstances

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reversal recognized by class typical of the of asset and reportable entrepreneurial segment; activity concerned, and • if the aggregation of assets shall be applied for identifying cash- following entry generating units has thereof in the changed the current and registers from the former way and the reasons date of putting for the change; into operation.

• whether the recoverable amount is its net selling price or value in use; The purchase price of rights • if net selling price the basis representing used to determine it assets may be written off over a • if value in use the discount period of 6 years rate used in current and or more, goodwill previous estimates. may be written off over a period of 15 years, while the capitalized value of completed research and development and the capitalized value of original contribution and restructuring may be written off over a period of 5 years or less. Should an entrepreneur decide to write off goodwill over a period of more than 5 years, it shall be explained in the supplementary appendix.

No depreciation may be accounted for the purchase price of land, plots of land (other than land or plots of land used for mining or the storage of chemical waste), forest, and works of fine art, in respect of investments not put into operation, and intangible assets and tangible assets already written off completely.

Extra depreciation above and beyond that planned shall be accounted for in respect of intangible assets, tangible assets and investments, if

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a) the value of intellectual property, tangible assets and investments drops permanently because such intellectual property, tangible assets and investments have become unnecessary due to a change in the entrepreneurial activity, or cannot be used for the original purpose thereof as a consequence of damage destruction, or cannot be used at all;

b) rights representing assets can only be exercised to a limited extent or cannot be exercised at all due to the amendment of the contract;

c) an activity coming into being as a result of completed research and development is limited or terminated, or produces no result.

Depreciation shall be effected to an extent that the intangible assets, tangible assets and investments listed in Paragraphs a), b) and c) be shown in the balance- sheet at the (known) market value corresponding to the utility thereof, and prevailing at the preparation date of the balance-sheet.

If a material change, other than those defined in Subsection (1), has occurred in the circumstances taken into

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consideration at the time of the establishment (planning) of the annual depreciation to be accounted for in respect of tangible assets of crucial importance from the point of view of the enterprise the

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29. Provisions, Contingent Liabilities and Contingent Assets Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 37) Republic Macedonia

Scope and IAS 37 becomes effective for Not specified. Provisions for bad The statutory Comparable to Accounting Act, Comparable to The Act on Comparable to Not defined. Not applicable. Comparable to Not applicable Basically No SAS covers effective accounting periods beginning debts and regulations in IAS Accounting IAS (EAL §3, Accounting came IAS. IAS. comparable to this area, use date on or after July 1, 1999. Earlier potential liabilities banking industry Procedures for §35). into force on IAS, but less IAS.

application is encouraged. are accounted for prescribe Businessmen January 1, 1992. detailed. IAS may in accordance provisioning for Article XI and be applied as a Applying IAS 37 with NAS 3, which bad or doubtful Income Tax Act. guidance IAS 37 prescribes the does not bring becomes effective loans and other accounting and disclosure for about any for accounting credit risk related all provision, contingent changes in periods on or assets. The N/A liabilities and contingent assets current practice. after January 1, provisioning is except: 1999. based on N/A methodology • those resulting from financial developed by the

instruments carried at fair National Bank, N/A value; which may not be as conservative N/A • those resulting from non- as it is required onerous executory contracts; by the International • those arising in insurance Accounting enterprises from contracts Standards. with policyholders; and

• those covered by other The statutory

Standards. rules do not require The effect of adopting this provisioning for N/A Standard on its effective date doubtful or bad should be reported as an accounts adjustment to the opening receivable, balance of retained earning for however an entity the period in which the is allowed to Standard is first adopted. If create tax non- comparative information is not deductible restated, this fact should be provisions. disclosed.

Definitions A provision is a liability of Comparable to Note in NAS the A provision is a Comparable to Czech accounting Comparable to The principle is Comparable to Not defined. No direct Comparable to There is no Only general No SAS covers uncertain timing or amount. IAS. term “provision” is liability of IAS law does not have IAS (EAL §35). the same under IAS. definition of IAS. distinction made definition for a this area, use used in the uncertain timing specific HAS but it is not provision, between a provision. IAS. The following is context of or amount. definitions of the detailed in the Act contingent liability provision and a Note. In some countries the not defined: doubtful debts i.e. listed items. on Accounting. or contingent contingency. term ‘provision` is used in the adjustments in asset is given in context of impairment of assets • An obligating Note. In Belarus the value of the ‘Act’. and doubtful debts i.e. asset event the term The term assets. value adjustment accounts. ‘provision` is used “provision” is • A constructive Provisions are in the context of The term used in the obligation doubtful debts i.e. ‘provision’ also context: An obligating event is an event accrued asset value used in respect of that creates a legal or • expenses for A contingent adjustment amounts constructive obligation that overdue • Of impairment asset accounts. adjusting the results in an enterprise having receivables or of assets and value of doubtful no realistic alternative to • An onerous potential doubtful debts or overdue debts. settling that obligation. contract liabilities. The statutory rules do not give • Risks (litigation, • A restructuring Overdue a definition of guarantees to A constructive obligation is an receivables are contingent assets customers, obligation that derives from an receivables and liabilities. unrealized enterprise’s actions where the outstanding for foreign enterprise has indicated that it more than 90 exchange loss) will accept certain days. Overdue responsibilities by an receivables can There is no established pattern of past be subdivided to: equivalent practice or published policies definition in the which have created a valid • Doubtful debts RAS. expectation on the part of those – outstanding other parties that it will for less than discharge those 180 days; responsibilities. • Bad debts – outstanding for A contingent liability is: more than 180 days; and • a possible obligation that • arises from past events and Irrecoverable whose existence will be debts – which confirmed by the occurrence meet at least or non-occurrence or one or one of the

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or non-occurrence or one or following more future events not wholly conditions: (i) within the control of the the debtor is enterprise; or declared insolvent or in • a present obligation that liquidation or (ii) arises from past events but is insolvency not recognized because its is procedures not probable that the have ceased, obligation will require but the debt will settlement or the amount of not be the obligation cannot be recovered. measures reliably. Provisions for bad Note. The term ´contingent and doubtful liability` is used for liabilities debts are that do not meet the recognition recognized as criteria. current expenses at the following A contingent asset is a possible rates: asset that arises from past events and whose existence • Doubtful debts will only be confirmed by the – 20%; occurrence of one or more • uncertain future events not Bad debts – wholly within the control of the 50%; enterprise. • Irrecoverable debts – 100%. An onerous contract is a contract in which the Potential liabilities unavoidable costs of meeting are legal, court the obligation under the and constructive contract exceed the economic obligations of the benefits expected to be enterprise, which received from it. will be settled in the periods subsequent to the A restructuring is a program balance sheet that is planned and controlled date. by management, and materially changes either the scope of the Legal liabilities business undertaken or the arise form the manner in which the business current legislation is conducted. requirements such as liabilities for environmental costs.

Court liabilities arise from court claims placed against the enterprise, due to be settled in the future, whereby the potential loss is probable.

Constructive obligation arise when the enterprise has entered into a binding contracts where the expenses to be incurred will outweigh the income expected.

Recognizing A provision is recognized, if A provision for Recognition of Comparable to Provisions shall Comparable to Provisions can be Comparable to Not defined. A provision Comparable to Not specified. Comparable to No SAS covers provisions and only if,: potential the loan loss IAS be established for IAS (EAL §3). formed for IAS. should be IAS. IAS. The IAS this area, use obligations (all provisions general purposes recognized when: approach may be IAS.

types) should be according to the (e.g. for risks or ♦ expected applied. • an enterprise has a present recognized if National Bank’s business losses) losses (1) • it relates to obligation (legal or reliable estimate methodology is or for some ♦ expected definite or constructive) as a result of a could be made for based on the specific purpose liabilities (2) probable losses past event; expenses to be following criteria: (e.g. for repairs of ♦ other on economic

causes (3) activities in • it is probable that an outflow incurred by taking tangible assets, into account the exchange rate process; of resources will be required • time of a loan risks, losses). They are (1) On to settle the obligation; being overdue; uncertainties created as a the basis of

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uncertainties, created as a the basis of • a reliable estimate can be changes in • number of roll- percentage of a classifying the • information made of the amount of the current market overs; determined base customers and about a loss is obligation. derived from an conditions and • or as an absolute debtors, any possible type and value amount (e.g. for provisions shall appropriate A past event that leads to a legislative and of collateral; exchange rate be formed to source present obligation is called an technological losses), unless the debit of pre- (document) or it obligating event. For an event • debt servicing; changes. another act tax profit or can be justified to be obligating, it is necessary • prescribes directly loss for the in a reliable that the enterprise have no some other. a method of purpose of way; realistic alternative to settling A provision for creating these covering any the obligation created. This is • legal and provisions. losses a reliable the case, when settlement can constructive expected to be estimate of the be enforced by law or creates obligation should incurred due to potential loss valid expectation that the Provision is be recognized receivables and can be made. enterprise will discharge the recognized for when: doubtful debts obligation. business risks or outstanding on No detailed • The company losses at the time the accounting guidance is given has a detailed when the Note. As an obligation always date of the in respect of: formal plan potential future involves a commitment to balance-sheet approved by business risks or • identification of another party, a valid (including any the owners; losses are known obligating expectation can only be cash and to them on the event; created if the decision has receivables basis of the been communicated to the from credit • A provision is • The plan has current facts, assessment of other party. institutions or recognized if the been according to probability of financial probability that announced. individual cases the loss enterprises), For the purpose of this the event will where such risks occurrence. and due to Standard, a provision is occur is greater and losses can be amounts recognized if the probability than the expected to extended as that the event will occur is probability that it occur. loans or greater than the probability that will not. advance it will not. Where there are a Provisions shall payments. In number of similar obligations be divided into the cases of (e.g. product warranties or those whose receivables of a similar contract) the probability creation and use small amount that an outflow will be required Estimates are are prescribed by as per each is determined by considering used to determine a legislative Act customer or the class of obligations as a the carrying and are debtor (that is, whole. amount of provisions. recognized by the not exceeding Income Taxes Act three times the Estimates are used to (legal provisions), expected costs determine the carrying amount No further and those whose of any distrait of provisions. It is generally guidelines for creation and use proceedings), possible to determine a range recognizing are not which have of possible outcomes, which provisions. recognized by the exceeded the are sufficiently reliable to use in Income Taxes term of recognizing the provision. As Act, and which payment by the use of estimates is an are determined by more that one essential part of the preparation the accounting year, the of financial statement, this does unit itself (other amount of the not undermine their reliability. provisions). provisions may also be established as If no reliable estimate can be a percentage of made, a liability exists that the amount of cannot be recognized and the such liability is disclosed as a receivable. The contingent liability. amount of the provisions Only expenditures that relate to formed shall be the original provision are set detailed in the against it. supplementary appendix according to the legal grounds listed.

(2) Provis ions may be formed for the purpose of covering guarantee obligations defined in legal provisions, early retirement pensions and severance payments.

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Should an entrepreneur from no provisions for covering the guarantee obligations defined above, all of such guarantee obligations by type of guarantee shall be detailed in the supplementary appendix. Should an entrepreneur have formed no provisions for covering the guarantee obligations, and the amount of the guarantee obligations incurred is substantially different from those of the previous year, it shall be demonstrated and explained in the supplementary appendix.

(3) If the entrepreneur has accounted for any unrealized losses on exchange due to (investment- related) debts in a foreign currency not covered by the foreign exchange balance on the foreign exchange account, or to debts arising from the issue of bonds in any foreign exchange, as deferred expenses and accrued income in accordance with Subsection (4) of Section 24, at the end of the year, the entrepreneur shall demonstrate provisions in the amount corresponding to the proportion of the time passed since

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the borrowing and the full term of the credit, for the accumulated item of deferred expenses and accrued income concerned. Should the provisions formed for this purpose before the end of the previous year be less or more than this amount, the provisions shall be increased by such difference against other expenditures, or decreased by such difference against other income in the subject year. The full term of the credit taken into account during such calculation may not be longer that the expected lifetime of the tangible asset – as considered for depreciation – financed by the credit.

Recognition An enterprise should not Not specified. Not specified. The statutory Comparable to IAS can be Comparable to Not specified. Comparable to Not defined. Recognition Comparable to Some of the An enterprise No SAS covers of contingent recognize a contingent liability rules do not IAS applied unless IAS (EAL §3 and IAS. criteria not IAS. contingent should not this area, use liabilities and or asset. prescribe provision is §35). specified. liabilities (those recognize a IAS. assets recognition and recognized as recorded in off contingent liability disclosure of described above. balance sheet or asset. A contingent liability is Information about contingent accounts like Disclosure in the disclosed unless the outflow of all contingent liabilities and guarantees and notes is resources to settle the liabilities should assets. those arisen from necessary. obligation is remote. be disclosed in bills of exchange) the notes. have to be

A contingent asset is disclosed disclosed. where an inflow of economic No disclosure of benefits is probable. contingent assets

is required. Contingent liabilities and assets are assessed continually to determine whether an outflow or inflow of resources has become probable. If this is the case a provision or income is recognized in the financial statements.

Measuremen The amount recognized as a Not specified. The amount Not specified. Comparable to IAS can be Comparable to The principle is Comparable to Not defined. The amount Comparable to Not specified. No detailed No SAS covers t provision should be the best recognized as a IAS applied. They are IAS (EAL §35 and the same under IAS. recognized as a IAS. Only for tax regulation, but this area, use estimate of the expenditure provision for created as a EASB, Balance HAS but it is not provision should deductible IAS approach IAS. required to settle the present potential percentage of a Sheet Accounts). detailed in the Act be the best provisions. may be applied. obligation at the balance sheet obligation should determined base on Accounting. estimate of the Government date. be the best or as an absolute expected loss. issues calculation estimate of the amount (e.g. for guidelines. The principle is expenditure exchange rate No detailed The best estimate required to the same under required to settle losses) unless guidance is

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settle the present obligation is required to settle losses), unless HAS but it is not guidance is the amount that an enterprise the present another Act detailed in the Act provided on the would rationally pay to settle obligation at the prescribes directly on Accounting. methods of the obligation at the balance balance sheet a method of expected loss sheet date or to transfer it to a date. creating these assessment.

third party. reserves. Discounting of The principle is provisions is not Where the provision being Provisions are the same under directly measured involves a large subject to HAS but it is not addressed in the population of items, the inventory taking detailed in the Act ‘Act’. In practice obligation is estimated by and, at the date of on Accounting. where the effect weighing all possible outcomes inventory taking, of time value of by their associated their level and money is probabilities. The name for this necessity are material, relevant statistical method is expected evaluated. amounts are value. subject to The accounting discounting. Where a single obligation is unit in its The principle is being measured, the individual guidelines shall the same under most likely outcome may be the determine the title HAS but it is not best estimate of the liability. (description) of detailed in the Act Even in such a case, the reserves, their on Accounting. enterprise considers other amount or the possible outcomes. methods of creation, and the The principle is method of their the same under The risks and uncertainties that use. HAS but it is not surround many events should detailed in the Act be taken into account in on Accounting. reaching the best estimate of the provision. The principle is the same under Prudence should be employed HAS but it is not to ensure that assets are not detailed in the Act overstated and liabilities on Accounting. understated. However, uncertainty does not justify the creation of excessive provisions or a deliberate overstatement of liabilities.

Where the effect of the time Not specified. value of money is material, the amount of the provision should be the present value of the expenditure expected to be required to settle the obligation.

The discount rate should be a Not specified. pre-tax rate (or rates) that reflect(s) current market assessments of the time value of money and the risks specific to the liability.

Future events that may affect The principle is the amount required to settle the same under an obligation should be HAS but it is not reflected in the amount of the detailed in the Act provision where there is on Accounting. sufficient objective evidence that they will occur. The principle is the same under Gains on expected disposal or HAS but it is not assets should not be taken into detailed in the Act account in measuring a on Accounting. provision.

If the enterprise expects that some or all of the expenditure required to settle a provision Not specified. shall be reimbursement, the reimbursement is recognized as a separate assets when it is certain that payment will occur.

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Application Provisions for future operating Not specified. Provisions should No statutory rules Comparable to Recognition of Comparable to Not specified. Comparable to Not defined. Provisions for Comparable to Not specified. No detailed No SAS covers of the losses should not recognized, not be recognized as to future IAS provision for IAS. IAS. future operating IAS. regulation, but this area, use recognition as future losses do not meet for future operational losses future losses is losses not IAS approach IAS. and the definition of a liability. operating losses. exist. allowed under the specifically may be applied. measuremen condition addressed in the t rules mentioned above. ‘Act’. If the enterprise has a contract No specific

that is onerous, the present requirements for Provisions for obligation under the contract recognition of Not specific expected losses should be recognized and onerous described but on onerous measured as a provision. The contracts. covered by the contracts should unavoidable costs under a general be recognized contract reflect the least net requirements for according to cost of exiting from the provisions. general rules – for contract, which is the lower of the amount of the cost of fulfilling it and any expected losses. compensation or penalties arising from the failure to fulfil it.

Application A restructuring is: Not specified. Not specified. No statutory rules Comparable to Not specified. Comparable to Not specified. Comparable to Not defined. Restructuring Comparable to Not specified. Comparable to No SAS covers of as to the IAS IAS. IAS. provisions not IAS. IAS. this area, use recognition restructuring specifically IAS. • the sale or termination of a and exist. addressed – line of business; measuremen general rules t rules to • the closure of business apply. restructuring locations in a country or provisions region or the relocation of business activities from one country to another;

• changes in management structure, for example, eliminating a layer of management;

• fundamental reorganizations that have a material effect on the nature and focus of the enterprise’s operations.

A provision for restructuring is recognized when the enterprise has a detailed formal plan for the restructuring which exactly identifies the business, locations and number of employees affected and the plan by being announced has raised valid expectations in those affected by the plan.

No obligation arises from the sale of an operation until the enterprise is committed to the sale; i.e. there is a binding sale agreement.

A restructuring provision should include only the direct expenditures arising from the restructuring, which are those both necessarily entailed by the restructuring and not associated with the ongoing activities of the enterprise.

A restructuring provision does not include costs of retraining or relocating staff, marketing or investments in new systems or distribution networks.

Disclosure For each class of provision a Not specified. An enterprise No statutory rules Comparable to Comparable to Comparable to The amount of Comparable to Not defined. For each class of Comparable to Reconciliation of Comparable to No SAS covers reconciliation of the opening should disclose: as to disclosure IAS IAS. IAS (EAL provision formed IAS. provision a IAS. the opening and IAS. this area, use and closing balance shall be exist. Appendix 3). in the subject reconciliation of closing balance of IAS. disclosed Comparative year an in the the opening and the provisions for

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disclosed. Comparative year an in the the opening and the provisions for information is not required. A • provisions for previous year for closing balance impairment of description regarding the bad, doubtful the purpose of showing assets and for nature of the expected and covering liabilities increases, risks has to be obligation expected timing of irrecoverable of environmental applications and disclosed. cash outflows, uncertainties debts made in protection under reversals should about amount or timing and the the period; guarantee, be disclosed The method used amount of expected separated by together with • for calculation has reimbursements shall be a brief legal grounds, the comparative also to be disclosed. description of amounts information. disclosed. the nature of accounted for in the obligation the subject year Information about For contingent liabilities for the potential and in the all contingent Disclosure is disclosure is required regarding liabilities; previous year as liabilities required for the their nature, estimated financial costs of (including those contingent effect, the uncertainties • the effect from environmental for which the liabilities recorded surrounding their settlement the review of protection under probability of in off balance and the possibility or the potential guarantee, as outflow of sheet accounts reimbursement. liabilities. well as the resources is like guarantees expected amount remote) should be and bill of For contingent assets their of environmental disclosed in the exchange. The nature and estimated financial damages and notes. required elements effect shall be disclosed. liabilities not to be disclosed included in the No disclosure of are not specified. balance-sheet contingent assets

shall be described is required. No disclosure in the requirements for supplementary contingent assets. notes to the statutory financial statements.

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Scope and IAS 38 becomes effective for Comparable to Intangible assets Comparable to Comparable to Czech Accounting Comparable to Hungarian Not specified. Not defined. Not specified. Comparable to Romanian Slovak No SAS covers effective accounting periods beginning IAS are accounted for IAS IAS Act and IAS (EAL § 33, Accounting IAS. Accounting Law. Accounting Act this area, use IAS. date on or after July 1, 1999. in accordance Accounting EASB, Balance Standards and Accounting Earlier application is with NAS 5, which Procedures for Sheet Accounts). („HAS“) are Procedures for encouraged. Disclose earlier, becomes effective Businessmen effective from Businessmen deal application and apply IAS 22, for the accounting deal with 1992. with Intangible Business Combinations and periods on or after Intangible Assets. Assets. IAS 36, Impairment of Assets, January 1, 1999. at the same time.

IAS 38 prescribes the accounting and disclosure for

intangible assets that are not specifically dealt with in other Standards. This standard supersedes:

• IAS 4, Depreciation Accounting, with respect to the amortization of intangible assets; and

• IAS 9, Research and Development Costs.

IAS 38 does not apply to rights and expenditure on the development and extraction of natural resources or intangibles arising in insurance enterprises from contracts with policyholders.

Definitions An intangible asset is an Comparable to An intangible An intangible Comparable to Intangible assets Comparable to Non-material Comparable to Not defined. Intangible assets Comparable to Not specified. General basic No SAS covers identifiable non-monetary IAS. asset is an asset is an IAS include: IAS. assets (rights IAS. are: IAS. definition of an this area, use IAS. asset without physical identifiable non- identifiable non- representing intangible asset, No distinction is substance held for use in the monetary asset monetary asset pecuniary value, as in IAS, is • incorporation • property rights made between production or supply of goods without physical without physical goodwill, missing. expenses – (in particular research and or services, for rental to substance held substance held intellectual connected with right to development others, or for administrative for the purpose of for use in the property, the setting up of perpetual expenditures. Specific purposes. future benefits production or capitalized value a new usufruct, co- definitions for: expected to flow supply of goods of research and enterprise and operative right to the enterprise. or services, for development) Research is original and expenses which to premises, rental to others, or which serve the • incorporation planned investigation are to be paid copyright, rights for administrative entrepreneurial expenses undertaken with the prospect Intangible assets subsequently to designs, purposes. activity directly of gaining new scientific or are classified as by the inventions, and on a • research and technical knowledge and current and fixed. accounting unit patents, permanent basis development understanding. The statutory to other trademarks, during the rules recognize persons, such ornamental • Research is expected lifetime Computer the following as to its parent patterns, Development is the original and but at least during software intangible assets: company, in licenses and application of research planned the depreciation connection with computer • Valuable rights findings or other knowledge to investigation period shall be its programs) – intangible a plan or design for the undertaken with • patents and entered among establishment. whose industrial rights production of new or the prospect of intangible assets. licenses; and other substantially improved gaining new expected useful • Results of results of materials, devices, products, scientific or • know-how; life is more than research and intellectual processes, systems or technical one year, • similar activity – creative services prior to the knowledge and rights for designed to be results of activities, commencement of understanding. utilization of The capitalized used by the successfully patents, commercial production or natural value of original entity or rented completed licenses and use. resources; contribution and to others; Development: the projects know-how. restructuring may application of • copyrights; and (acquired • start-up costs also be entered An active market is a market research findings separately or or costs of among intangible where all the following generated in the • establishment developed by extension of a assets. conditions exist: company or costs. the accounting joint stock purchased to a unit for the company; plan or design for purpose of sale, • the items traded are • the production of or recurring goodwill; homogenous; prototypes prior to sales). • costs of the • willing buyers and sellers • completed commencement Computer can normally be found at development of commercial software – any time; work. production or use. acquired as a separate item • prices are available to the Research: no or produced public. definition An active market internally for the provided. is a market where purpose of sale. all the following

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all the following conditions exist: • Valuable rights Development: – intangible investigations or industrial rights otherwise gained • the items and other knowledge, the traded are results of result of which homogenous; intellectual may be used for creative the production of • willing buyers activities, specific new or and sellers can patents, improved normally be licenses and products or found at any know-how. technologies. time;

• prices are available to the public.

Recognitio An intangible asset should be Comparable to An asset should An intangible Comparable to The limit for Comparable to Same as IAS. Comparable to Not defined. Recognition criteria Comparable to Not specified. The limit for No SAS covers n and initial recognized, if and only if: IAS. be recognized as asset is IAS recognition is IAS. IAS. not specified. IAS. recognition is SKK this area, use IAS. measureme an intangible fixed recognized when CZK 60,000 and a 40,000 and a nt of an asset if, and only it is purchased or useful economic An intangible asset useful economic • its is probable that the intangible if: when cost of lifetime longer should Initially be lifetime longer futures economic benefits asset registration of a than one year. recorded at cost than one year. that are attributable to the patent or right is (an acquisition asset will flow to the • it meets the paid. An intangible price or asset An intangible enterprise: and definition of an asset should be production cost). asset should be intangible • measured at cost, initially measured the cost of the asset can be asset; An intangible initially. Acquisition price at cost, which can measured reliably. asset should be • defined similarly to be: the cost of the measured at cost, IAS. An enterprise should assess asset can be initially. the probability of futures measured Acquisition cost Asset production • acquisition economic benefits using reliably; includes the cost comprises price reasonable and supportable purchase price expenditure assumptions that represent • the expected and all expenses directly • management’s best estimate economic connected with replacement attributable and cost (in of the economic conditions benefit is their acquisition overheads that that will exist over the useful proved by (such as case of can be donated life of the asset. Greater availability of prototypes, reasonably weight should be given to plan foreseeing models, samples, intangible allocated to the asset) external evidence. adequate alternatives project. resources versions) Intangible assets should be allowing the If an asset • own initially measured at cost. economic received for no expenditure benefits to flow consideration (in case of to the (particularly in the internally The cost of an intangible enterprise; form of a free gift) produced asset comprises its purchase – value should be intangible • is technically price and any directly determined on the asset) attributable expenditures from feasible; basis of the selling which discounts and rebates price of the same • is intended to have been deducted. or a similar item. be produced, sold, or used by No specific the enterprise; regulations • regarding its value exchange of exceeds 150 assets. Lev (new). No discounting of The cost of an deferred intangible asset consideration. comprises its purchase price and any directly attributable expenditures from which discounts and rebates have been deducted.

Recognitio In accordance with this The recognition Comparable to Not specified. Comparable to Not specified Comparable to Same as IAS. Comparable to Not defined. An acquirer Comparable to Not specified. The approach for No SAS covers n and initial Standard and the criteria are IAS. IAS IAS (EASB, IAS. recognizes IAS. recognition of this area, use IAS. measureme requirements in IAS 22 comparable to Equity Method – intangible assets goodwill is nt of an (revised 1998) an acquirer IAS. Business that meet the comparable to intangible recognizes an intangible Combinations and general IAS although its asset in a asset that meets the general Consolidated recognition measurement No further business recognition criteria, even if Accounts). criteria. It is not may be different regulations combinatio that intangible asset has not possible to as statutory specified

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 38) Republic Macedonia n been recognized in the specified. recognize valuation financial statements of the intangible assets standards may acquire. not included in the differ significantly

financial from those statements of the accepted by IAS. If the cost cannot be acquiree. measured reliably, that asset Same is not recognized as a Assets acquired separate asset, but included in a business in goodwill. combination are measured at their Quoted market prices in an market values as active market provide the at the date of most reliable measurement of acquisition. fair value. Assets can be measured at their pre-acquisition If no market price exists, its carrying amounts, cost reflects the amount that if the difference the enterprise would have Same between pre- paid, at the date of the acquisition acquisition, for the asset in an carrying amounts arm’s length transaction. and market Same values is not Certain enterprises have material. developed techniques for estimating their fair values indirectly. These include applying multiples reflecting current market transactions to certain indicators driving the profitability of the asset or discounting estimated future net cash flows from the assets. Not specified Unless there is an active market for the intangible acquired, IAS 22 (revised 1998) limits the cost initially recognized to an amount that does not create or increase any negative goodwill arising at the date of acquisition.

Not defined under Acquisition Intangible assets may be Comparable to Not specified. Not specified. Comparable to Not specified. The Comparable to HAS. Not specified. Not defined. Intangible assets Comparable to Not specified. Donated intangible No SAS covers by way of acquired free of charge, or for IAS. IAS general provisions IAS. acquired free of IAS. assets are this area, use IAS. governmen a nominal consideration, by require charge should be recognized at their t grant way of government grant. recognition at recognized at their replacement cost. These may include airport- acquisition cost. selling price (if landing rights, licenses to available) or the operate radio or television selling price of the

stations, import licenses or same or a similar quotas, etc. item. Value of the grant is credited to Under IAS 20, Accounting for deferred income Government Grants and and amortized Disclosure of Government proportionately to Assistance, an enterprise depreciation of may choose to recognize both the related asset. the intangible asset and the grant at fair value. If not, the intangible assets and grant are recognized at a nominal amount plus any expenditure that is directly attributable to preparing the asset

Internally Internally generated goodwill Comparable to The accounting of Not specified. Comparable to The treatment of Comparable to Not specified. The treatment of Not defined. Treatment of Comparable to Internally Treatment of No SAS covers generated should not be recognized as IAS. internally IAS internally IAS (EASB, internally internally IAS generated internally this area, use IAS. goodwill an asset. To assess whether generated generated Balance Sheet generated generated goodwill is not generated

an internally generated goodwill is not goodwill is Accounts and goodwill and goodwill, brands, recognized. goodwill, research

intangible asset meets the specified by the comparable to EAL §33). research and mastheads, and development, criteria for recognition, an standard. IAS. development publishing titles, internally No distinction is enterprise classifies the costs is customer lists and generated brands, made between generation of the asset into a comparable to similar items as mastheads, No intangible Czech and research and development IAS. well as research publishing titles, asset arising from law does not development

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phase. asset arising from law does not IAS. costs comparable development customer lists and research should distinguish Same as IAS. to IAS. expenses that are items similar in be recognized. between research capitalized if they substance is No intangible asset arising The treatment of Expenditure on and development Recognition of are made for comparable to from research should be internally research is cost. intangible asset research IAS. recognized. Expenditure on generated brands expensed when arising from objectives or for research is expensed when etc. is not incurred. development is projects clearly incurred. Research and specified, refer to optional to the defined, for which development IAS. entity, provided it there is the An intangible costs can be An intangible asset arising is applied guarantee that asset arising from capitalized under from development should be consistently. they will meet development (or intangible assets recognized, if and only if, an their planned from the as long as they enterprise can demonstrate Recognition objectives and development of relate to the following: criteria are they will be useful an internal successfully comparable to to the enterprise. project) should be completed IAS except for: (a) the technical feasibility recognized if, and projects not of completing the only if it meets the subject to • development intangible asset so that criteria specified industrial and expenditure has it will be available for above for the other valuable to be covered use or sale; recognition of rights if: by additional intangible fixed revenues from assets. (b) its intention to complete • it is separately sales of the the intangible asset and identifiable in a new or use or sell it; project (i.e. not improved forming part of product or other fixed application of (c) its ability to use or sell technology the intangible asset; assets), and • • it can generate availability of (d) how the intangible asset future income adequate will generate probable for the entity. resources to future economic complete the The treatment of project and use benefits; internally the asset is not generated brands specifically (e) the availability of etc. comparable required. adequate technical, to IAS financial and other resources to complete the development and to use or sell the asset; and

(f) its ability to measure the expenditure attributable to the intangible during its development reliably. Same Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance should not be recognized as intangible assets.

Recognitio Expenditure on an intangible Comparable to Expenditure on an Any expenditure Comparable to Comparable to Comparable to Comparable to Comparable to Not defined. Comparable to Comparable to Comparable to Comparable to No SAS covers n of an asset should be recognized IAS. intangible asset should only be IAS IAS but with IAS. IAS. IAS. IAS except that IAS. IAS except for IAS, except for this area, use IAS. expense as an expense unless its should be recognized in reference to start-up costs or expenditure on expenditure on meets the recognition criteria recognized as an case it meets the Czech accounting costs of extension start-up activities start-up activities, in this Standard or is acquired expense unless classification law (and not this of a joint stock which is which is in a business combination its meets the specified by the IAS). company should capitalized. capitalized. and forms a part of the recognition criteria statutory rules. be capitalized as amount of goodwill at the date in this Standard. an intangible Incorporation The treatment of . of acquisition. asset. costs must be expenditure on an Examples of other capitalized as intangible asset is Examples of other expenditure that intangible assets. not specified. expenditure that is recognized is recognized as Regarding other as an expense when incurred an expense when examples of

include: incurred include: expenditure comparable to IAS. (a) expenditure on start-up • expenditure activities; on start-up activities; (b) expenditure on training activities; • expenditure on training (c) expenditure on activities; dtii d

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advertising and promotional activities; • expenditure on advertising (d) expenditure on and relocating or re- promotional organizing part or all of activities; an enterprise.

• expenditure Note. This does not preclude on recognizing a prepayment as relocating an asset. or re- organizing part or all of an enterprise, licenses,, quotas, etc.

Subsequen Subsequent expenditure on Comparable to Subsequent Any expenditure Comparable to Comparable to Comparable to Comparable to Comparable to Not defined. Subsequent Comparable to Not specified Comparable to No SAS covers t an intangible asset after its IAS. expenditure on an should only be IAS IAS IAS. IAS. IAS. expenditure on an IAS. IAS. this area, use IAS. expenditur purchase or its completion intangible asset recognized in intangible asset e should be recognized as an after its purchase case it meets the should be

expense when it is incurred or its completion classification recognized as an unless: should be specified by the expense when recognized as an statutory rules. incurred. expense when it • it is possible that this is incurred unless expenditure will enable the these enable the asset to generate future asset to increase benefits in excess of its the expected originally assessed economic benefits standard of performance; to flow to the and enterprise and : • this expenditure can be measured and attributed to • they increase the asset reliably. the useful life of the asset; and If these conditions are met, the subsequent expenditure • increase should be added to the cost productivity; of the intangible asset. and

• improve the quality of the products; and

• decrease the production costs; and

• change the scope of functions of the asset.

If these conditions are met, the subsequent expenditure should be added to the cost of the intangible asset.

Intangible assets are initially Comparable to Intangible assets Intangible assets Comparable to Comparable to Comparable to Comparable to Comparable to Not defined. Intangible assets Comparable to Initial recognition Only IAS No SAS covers Measureme recognized at cost. IAS are initially are initially IAS IAS IAS (EAL §33). IAS. IAS. initially IAS. comparable to benchmark this area, use IAS. nt recognized at recognized at recognized at IAS. treatment is cost. cost. cost. allowed. Benchmark treatment: After The treatment of The benchmark The benchmark Comparable to The benchmark The benchmark initial recognition, an reversal of a treatment is to be treatment is to be IAS. treatment is to be treatment is to be Subsequent The benchmark intangible asset is carried at revaluation The benchmark After initial applied. applied. applied. The revaluation is applied. measurement at treatment is to be cost less accumulated decrease and the treatment is recognition, an prohibited. cost less applied. amortization. treatment of comparable to intangible asset is The alternative The alternative Other methods accumulated realized surplus is IAS. carried at cost treatment is treatment is are not allowed. depreciation. The alternative not defined. less accumulated Comparable to Allowed Alternative prohibited. prohibited. treatment is not amortization. IAS. The alternative Treatment: After initial The alternative Revaluation of specified. treatment is recognition, an intangible treatment is intangible assets allowed asset should be carried at allowed. not allowed. revealed amount being its

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revealed amount, being its fair value at the date of the Any revaluation revaluation less any increase should be credited subsequent accumulated amortization and any directly to equity subsequent accumulated under the heading impairment losses. Fair value of revaluation should be determined by surplus. A revaluation reference to an active market. If no active market exists, the decrease of the asset should be carried at its same asset is cost less any accumulated eliminated against amortization and impairment the revaluation surplus. Any losses. excess is expensed. The allowed treatment does N/A. not apply to intangible assets that have not previously been A revaluation recognized as assets. increase should The revalued be recognized as amount of income to the intangible assets If an intangible asset is extent that it shall be carried in revealed, any accumulated reverses a the balance sheet depreciation is either restated revaluation at the revalued proportionally with the change decrease, which amount and new in the gross carrying amount was previously carrying amount or eliminated against the expensed. shall be reduced gross carrying amount of the by applicable asset and the net amount amortization over The cumulative restated to the revealed the remaining revaluation amount. useful life of the surplus is asset. recognized as The revaluation increase income upon should be credited directly to disposal of the The revaluation equity under the heading of revalued increase should revaluation surplus. A intangible asset. be credited revaluation decrease of the directly to equity same asset is eliminated under the heading

against the revaluation of revaluation surplus. Any excess is surplus. A expensed. revaluation decrease of the same asset is A revaluation increase should be recognized as income to eliminated against the extent that it reverses a the revaluation revaluation decrease, which surplus. was previously expensed. A revaluation The cumulative revaluation should be surplus may be transferred performed on a directly to retained earnings yearly basis and when the surplus is realized. the increasing or decreasing effect is charged directly to the revaluation surplus.

Amortizatio The depreciable amount of an Comparable to The depreciable Intangible asset is Comparable to Intangible assets Intangible assets The purchase or Intangible assets Intangible assets The depreciable Intangible assets Concessions, Intangible assets No SAS covers n period intangible asset should be IAS amount of an amortized over its IAS are amortized are amortized on manufacturing are amortized on are amortized on amount of an are amortized on licenses, are generally this area, use IAS. allocated over the best intangible asset useful life within a maximum a straight-line costs (purchase a straight-line a straight-line intangible asset a straight-line trademarks are amortized within a estimate of its useful life. should be determined by the period of five basis within a price and/or direct basis within a basis within a should be basis within a amortized over period of five The case when allocated over the enterprise or years. period of five manufacturing period of five period of five allocated over the period of five their intended years. the useful life best estimate of producer of this years with the costs) of years. years with the best estimate of years. period of use. There is a rebuttable exceed 20 years its useful life. asset. In case the exception of intangible assets exception of its useful life. presumption that useful life is not dealt with. The amortization useful life is not purchased rights shall be purchased rights will not exceed twenty years period may be Capitalized determinable the (concessions, distributed over (concessions, Amortization from the date when the asset changed to reflect research and Neither is the amortization licenses, and the years in which licenses, and period for is available for use. changes in development treatment of a period should not trademarks) which such assets are trademarks) which development Amortization should circumstances. expenses and set legal right for a exceed 10 years. may be amortized expected to be may be amortized costs, capitalized commence when the asset is up expenditures finite period within a period not used. within a period not start-up available for use. are amortized specified. to exceed 20 to exceed 20 (expansion) costs over a maximum years. years. and purchased Depreciation shall of five years. In rare cases, there may be goodwill shall not be effected to an persuasive evidence that the exceed 5 years. extent that the useful life of an intangible Goodwill is not intangible assets asset will exceed 20 years. In amortized. Only if be shown in the these cases the presumption impairment in balance-sheet at is rebutted The enterprise value is noted

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is rebutted. The enterprise the (known) value is noted, amortizes the intangible asset market value that impairment is over the best estimate of its corresponding to recorded as useful life. However, the the utility thereof, amortization. enterprise shall estimate the and prevailing at assets recoverable amount at the preparation Software (that is least annually in order to date of the considered identify any impairment loss. balance-sheet. intangible assets) The reasons for the rebuttal is amortized over and the factors significant to a maximum of five determining useful life shall years. be disclosed.

The useful life of an intangible asset is always finite. If control is achieved through legal rights that have been granted for a finite period, the useful life of the intangible asset should not exceed the period of the legal rights unless the rights are renewable and renewal is certain.

Amortizatio The amortization method Comparable to Intangible fixed The straight-line Comparable to The straight-line The straight-line When defining the The straight-line The straight-line The straight-line The straight-line The straight-line Amortization No SAS covers n method used should reflect the IAS assets are to be method or IAS method shall be method shall be value of intangible method shall be method shall be method of method shall be method shall be method is not this area, use IAS. and pattern in which the assets amortized by accelerated applied. applied. assets as shown applied. applied. amortization applied. applied. specified. residual economic benefits are applying straight- method shall be in the balance- should be applied. value consumed. If that method line or non-linear applied. sheet, the amount The amortization No further Residual value is The amortization The amortization The amortization cannot be determined, the methods (e.g. of depreciation period may be regulations are always zero. period may be period may be period may be straight-line method should reducing balance accounted for in changed to reflect specified. Amortization rates changed to reflect changed to reflect changed to reflect The amortization be used. method, sum of accordance with changes in for each year of changes in changes in changes in period may be the digits method, the Act shall be circumstances. the useful life are circumstances. circumstances. circumstances. changed to reflect etc). deducted from: The residual value of an set by the changes in intangible asset should be enterprise. circumstances. assumed to be zero unless a. the there is a commitment by a consideration paid third party to purchase the for the acquisition

asset at the end of its useful of rights which are life or there is an active marketable market for the asset. themselves, such as rights of lease, easement, If there are changes in the concession; in expected pattern of economic respect of rights benefits, the amortization representing method should be changed to assets, reflect these changes.

b. the acquisition

price, in respect of goodwill,

c. the acquisition and manufacturing costs of know- how an manufacturing procedures of patents an industrial design, of inventions and assets protected under industrial law, software products falling under copyright, other intellectual property, of assets without legal protection but monopolized through secrecy; in respect of the value of intellectual property,

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d. the manufacturing costs of research and development, if the results of such experimental development can be utilized in the future; in respect of the capitalized value of research and development,

e. the acquisition and manufacturing costs related to the start-up, substantial expansion, restructuring or reorganization of the entrepreneurial activity; in respect of the capitalized value of original contribution and restructuring.

f. The value of rights representing assets as per Paragraph a), and the value of intellectual property as per Paragraph c) may not contain the amount of any value correction.

g. Only an amount exceeding the book value of rights representing assets and intellectual property may be shown as value correction of intangible assets, and in the amount equal to the evaluation reserve within equity.

Recoverabi In addition to the Not specified Not specified. Not specified. Comparable to No specific Comparable to The recoverable Not specified, Comparable to Intangible assets Comparable to Not specified IAS 36 may be No SAS covers lity requirements in IAS 36, IAS requirements. The IAS. amount of refer to IAS. IAS. should be IAS. applied as a this area, use IAS. Impairment of Assets, the general provision intangible amount assessed for guideline for recoverable amount of regarding of intangible impairment at estimate of intangible assets that are not impairment of assets shall be each balance impairment yet available for use and assets applies. estimated at each sheet date provision (based intangibles amortized over a financial year-end. according to on the principle of period exceeding 20 years general rules. prudence). shall be estimated at each financial year-end.

Disposals An intangible asset shall be Comparable to Comparable to An intangible Comparable to Comparable to Comparable to Comparable to Comparable to Not defined. Derecognition Comparable to Comparable to Comparable to No SAS covers derecognized on disposal or IAS IAS. asset shall be IAS IAS IAS. IAS. IAS. criteria are IAS. IAS. IAS. this area, use IAS. when no future economic derecognized on comparable to benefits are expected from its disposal. IAS. use and subsequent disposal.

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Gains and losses are Gains and losses The carrying recognized as income or are recognized as amount of the expense in the income income or asset at the statement. expense in the moment of income statement. disposal should be recognized as

other operating cost, while proceeds from disposal (if any) respectively as other operating income.

Disclosure For each class of intangible Comparable to For each class of Disclose: Comparable to Comparable to Comparable to Comparable to Comparable to Not defined. Disclose: Comparable to For each class of Comparable to No SAS covers asset: IAS intangible assets IAS IAS IAS. IAS. IAS. IAS. intangible asset: IAS. this area, use IAS. disclose: • accounting • a description of policies valuation • • the useful lives or adopted; methods the amortization • amortization rates used; the gross available under methods used; carrying • amortization the ‘Act’ • the amortization methods • gross carrying amount, methods used; adopted by the used; amount and accumulated entity (including • the useful lives accumulated • amortization depreciation); gross carrying amount and and net book or amortization depreciation at accumulated depreciation value at the rates used; and • in respect of the beginning at the beginning and end of beginning and each major and end of the the period; • the end of the reconciliation of class of period; period; the balances of intangible • the line items in which • the line items in intangible assets – a amortization is included; • which value of the assets detailed disclosed by amortization is • a reconciliation of the intangible reconciliation of type at the included; carrying amount at the assets acquired opening to beginning and beginning and end of the during the closing • period; end of the a reconciliation period. balances of of the carrying period. gross carrying • subsequent amount at the Comparative information is amount and expenditure Comparative beginning and not required. accumulated related to information is end of the depreciation intangible fixed required. period. showing Disclosure is required for the assets; aggregate amount of significant Comparative research and development • subsequent categories of information is not

expenditure recognized as an expenditure movements required during the year; expense during the period. related to Not defined. intangible fixed • listing of assets liabilities groups recognized as a secured on the separate entity’s assets; intangible fixed The following asset or as an shall be • amounts and increase of the accounted for reasons for initial value; among other unplanned depreciation • value of revenues: charges; intangible fixed a. revenues from assets the sale of • own disposed during intangible assets development the period; and and tangible costs capitalized. • revaluation assets in the surplus at the period of such beginning and sale. at the end of the period. The following For research shall be costs disclose accounted for as total amount of other the expenditure in expenditures. the period. a. costs of the For development sale of intangible costs disclose: assets and tangible assets • total amount of (including the the expenditure registered value for the period of these assets) in and the period of such cumulatively; sale.

• total amount of

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the intangible assets recognized in the period.

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31. Financial Instruments: Recognition and Measurement Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 39) Republic Macedonia

Scope and IAS 39 is operative for financial Not specified See Section ‘IAS Financial assets Comparable to Not specified. Not specified. Comparable to Not defined. Not defined. Not applicable. Not specified Not specified. No regulation No SAS covers effective statements covering financial 32’. are carried at cost IAS. IAS. specifically this area, use IAS. date years beginning on or after 1 The concepts of Financial Financial covering financial January 2001. Earlier application financial instruments are instruments and instruments.

is permitted for financial years instruments referred to in the their recognition Certain aspects included within IAS EAL and EASB’s and measurement that end after 15 March 1999. are covered by 39 are not defined guidelines, but not criteria are not Retrospective application is not regulation. permitted. within Czech in total. addressed in the accounting ‘Act”. legislation and IAS 39 establishes principles for regulations. The

recognizing, measuring, and legislation and

disclosing information about regulations refer financial assets and liabilities. only to individual instrument types. IAS 39 does not apply to:

• interests in subsidiaries, associates and joint ventures that are accounted for under other standards (IAS 27, 28 and 31);

• rights and obligations under leases accounted for under IAS 17 with the exception of receivables recognized by lessors;

• employer’s assets and liabilities under employment benefit plans accounted for under IAS 19, Employee Benefits.

• rights and obligations under insurance contracts;

• equity instruments of the issuer including options, warrants, and other financial instruments classified as equity;

• financial guarantee contracts except for those incurred or retained as a result of the derecognition standards set out in this standard;

• contract for contingent consideration in a business combination;

• contracts that require a payment based on

Note. IAS 39 applies to derivatives embedded in lease, insurance and other contracts and financial guarantee contracts the settlement of which are linked to underlying variables or indices.

Definitions Financial instruments, financial Not specified See Section ‘IAS Financial assets Comparable to See above Comparable to IAS Comparable to Not defined. Not defined. Not specified. Not specified Not specified. No definition of No SAS covers assets, financial liabilities and 32’. are carried at cost IAS. (EASB, Annual IAS. derivative in this area, use IAS. equity instruments are defined as Accounts of Credit accounting in IAS 32, Financial Instruments: Institutions). regulation. Disclosure and Presentation.

Derivative – a financial instrument

• whose value changes in response to the changes in a specified underlying rate, price, index or ´underlying` variable.

• that requires little or no initial

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investment relative to other contracts that have a similar response to changes in market conditions; and

• that is settled at a future date.

Note. Typical examples of derivatives are future, forward, swap and option contracts. The derivative usually has a notional amount, which is amount of currency, number of shares, number of units of weight or volume or other units specified in the contract.

Four Held for trading – financial Comparable to IAS Comparable to Not specifically Comparable to See above Comparable to Comparable to Not defined. Not defined. Not specified. Not specified Not specified. No definitions, but No SAS covers definitions assets or liabilities held for the IAS. defined by the IAS. IAS. IAS. held for trading this area, use IAS. of financial purpose of generating a profit statutory rules. and available for assets from short-term fluctuations in sales are

price of dealer’s margin. mentioned when Derivatives are ´held for trading` describing short unless designated as hedging term financial instruments. investments.

Held-to-maturity – financial Regulation for assets with fixed or determinable banks does include payments and maturity that the distinction between enterprise has the positive intent trading and and ability to hold to maturity. investment portfolios of securities. Their Loans and receivables treatment and originated by the enterprise – accounting classified separately. If originated policies, is with the intent to sell immediately comparable to IAS or in the short term – classified as treatment. ´held for trading`.

Available for sale – financial assets not classified under the three categories shown above.

Definitions Amortized cost of a financial Not specified Not specifically Not specifically Comparable to IAS See above. Comparable to Comparable to Not defined. Not defined. Not specified. Not specified Not specified. Amortized costs No SAS covers relating to asset or liability – amount defined by the defined by the IAS. IAS. are not defined. this area, use IAS. recognition initially recognized minus principle statutory rules. statutory rules. and repayments, plus/minus measureme cumulative amortization of the nt difference between initial and maturity amount, less any write- down for impairment or uncollectability.

Effective interest method – method for calculating amortization using the effective interest rate of a financial asset or liability.

Note. Effective interest rate is the internal rate of return of the financial asset or liability for that period.

Definitions Hedging – offsetting changes in Not specified Comparable to Not specifically Comparable to IAS Hedge accounting Comparable to Comparable to Not defined. Not defined. Not specified. Not specified Not specified. Hedging and No SAS covers related to fair value or cash flows of a IAS. defined by the is not defined in IAS. IAS. hedging this area, use IAS. hedge hedged item statutory rules. A existing Czech accounting is not accounting generally accepted legislation and covered by classification is: regulations. regulation. Hedged item – is an asset, liability, firm commitment or Hedging- offsetting forecasted future transaction that changes in fair exposes the enterprise to risk of value or cash flows changes in fair value or in future of a hedged item. cash flows. Hedged item – is

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an asset, liability, Hedging instrument – a firm commitment or designated financial asset/liability forecasted future or derivative whose fair value or transaction that cash flows are expected to offset exposes the changes in the fair value or cash enterprise to risk of flows of a hedged item. changes in fair value or future Hedge effectiveness – the cash flows. degree to which offsetting Hedging changes in fair value or cash instrument – a flows attributable to a hedged risk designated are achieved by the hedging financial instrument. asset/liability or derivative whose fair value or cash flows are expected to offset changes in the fair value or cash flows of a hedged item.

Initial Recognize a financial assets and Not specified Comparable to Recognize a Comparable to Comparable to Comparable to IAS Comparable to Not defined. Not defined. Not specified. Comparable to Not specified. Recognition No SAS covers recognition liability when and only when the IAS. financial asset or IAS. IAS. IAS. IAS. moment can be the this area, use IAS. enterprise become party to a liability only when same. contractual provision of the the enterprise Commitments to instrument. becomes party to purchase or sell

the contractual goods or services provisions of the are not recognized. Receivables and payables are instrument. Loans recognized when the enterprise and investments becomes a party to the contract Initial recognition in should be and has a legal right to receive or banks is similar to recognized on the pay cash. Firm commitments to the treatment balance sheet – purchase or sell goods or under IAS except derivatives should services are not recognized under they are accounted be recorded in off present accounting standards. for in the off balance sheet balance sheet accounts. (included in this Forward contracts are recognized group for example on the commitment date. The fair Receivables and is: derivatives, values of the right and obligation payables are guarantees, are often equal so that the net fair recognized on the collateral, loan value is zero. Only the net fair value date, when commitments, value of the right and obligation is the enterprise letters of credit, recognized as an asset or liability. obtains a legal right to receive or assets under pay cash. leases). Financial options are recognized as assets and liabilities when the Certain items can holder or writer becomes a party be recognized at to the contract. nominal value (difference is posted to accrued/deferred items), certain at cost.

Derivative is recognized when the company paid the initial amount. It should be carried at cost. Derivatives with zero initial value should be treated as off balance sheet items with disclosure in the footnotes. For example payments related to signing forward contract should be expensed.

Initial A ´regular way` contract requires Not specified. Financial Not specified Comparable to No specific `Regular way` Comparable to Not defined. Not defined Not specified. Not specified Not specified. Regular way No SAS covers recognition the delivery of assets within a instruments are IAS. guidance on the purchases and IAS. contracts are not this area, use IAS. of ´regular short time frame established by recognized using use of settlement sales contracts are covered by the way` regulation or convention in the trade date or date or trade date recognized using regulation. Asset is

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Albania Bulgaria Byelorussia Croatia Czech Estonia Hungary Latvia Lithuania Poland Republic of Romania Slovakia Slovenia Topic International (IAS 39) Republic Macedonia contracts market place. settlement date accounting. the settlement date usually recognized accounting. Practice has been method (EASB, using settlement to use settlement Annual Accounts date when the A ´regular-way`purchase of Trade date date method. of Credit legal ownership is financial assets is recognized accounting refers Institutions). transferred. using trade date or settlement to the recognition date accounting. of the financial instruments when A ´regular way`sale of financial the enterprise assets is recognized using becomes a party to settlement date accounting. the contractual provisions of the instrument. Under settlement date accounting, the purchaser Under settlement recognizes and the seller date accounting, derecognizes the asset when the financial transferred. The amounts of any instrument is change in the fair value of the recognized when asset to be received or ownership is transferred between the trade and transferred. settlement dates will depend on how the contract is classified.

Derecogniti A financial asset (portion) is Not specified Comparable to A financial asset Comparable to Comparable to Comparable to Not defined. Not defined Not specified. Comparable to IAS Not specified. Assets are No SAS covers Comparable to on derecognized when, the IAS. (portion) is IAS. IAS. IAS. derecognized this area, use IAS. enterprise loses control of the derecognized IAS. No specific when legal contractual rights that comprise when, the Accounting for Accounting for guidance for ownership is No specific the financial asset e.g. realizes enterprise loses repurchase repurchase accounting of transferred, when guidance for the rights to benefits specified in control of the agreements and agreements and collateralized rights expire, or the accounting of the contract, the rights expire, or contractual rights collaterized collaterized Borrowings. enterprise collateralized the enterprise surrenders these that comprise the borrowing is borrowing is surrenders these borrowings. rights. financial asset e.g. prescribed in the prescribed in rights. realizes the rights relevant EASB, Annual to benefits regulations. Accounts for Credit If the transfer of financial assets Collaterized specified in the Institutions. do not meet these conditions, the borrowings are not contract, the rights transferor accounts for the defined in our expire, or the transaction as a collaterized legislation. They enterprise borrowing and the transferor’s are usually surrenders these right to reacquire the assets is not accounted for as rights. This is also a derivative. sale and the case with as to subsequent accounting for purchase. This is A transferor has not lost control if, repurchase due to the fact that for example agreements. the substance over form concept is not • the transferor has a right to used. reacquire the asset unless wither (i) the asset is not readily In banks, the obtainable or (ii) the treatment is reacquisition price is fair value comparable to IAS. at the time of acquisition:

• the transferor is both entitled and obligated to repurchase or redeem the asset on terms that effectively provide the transferee with a lender’s return on assets

• the asset transferred is not readily obtainable on the market and the transferor has retained substantially all the risks/returns of ownership.

Note. The transferor generally has lost control of the transferred asset only if the transferee has the ability to obtain benefits of the transferred asset.

Accounting If a debtor delivers collateral and Not specified Comparable to No statutory rules Comparable to IAS No specific Comparable to Comparable to Not defined. Not defined Not specified. Comparable to IAS Not specified. See above No SAS covers for collateral the creditor is permitted to sell or IAS. exist in this area. guidance exists IAS. IAS. this area, use IAS. repledge the collateral without with regards to constraints, then these transactions.

• the debtor discloses the collateral separate from other assets: and

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• the creditor should recognize the collateral and obligation to return the collateral (liability) at fair value.

Derecognizi Allocate the carrying amount Not specified No statutory rules No statutory rules Comparable to IAS Comparable to IAS Comparable to Comparable to Not defined. Not defined Not specified. Comparable to IAS Not specified. See above No SAS covers ng part of a between the amount retained and exist in this area. exist in this area. IAS. IAS. this area, use IAS. financial sold relative to their fair values. A asset gain/loss is recognized for the portion sold. If the fair value of the part retained cannot be measured reliably, its is recorded at zero.

Asset If an entire financial asset is Not specified If an entire No statutory rules Comparable to IAS In the absence of Comparable to Comparable to Not defined. Not defined Not specified. Comparable to IAS Not specified. No regulation No SAS covers derecognitio transferred but a new asset or financial asset is exist in this area. specific guidance it IAS. IAS. exists. this area, use IAS. n coupled liability is assumed, the new asset transferred in is likely that such with a new or liability is recognized at fair exchange for a transactions would financial value. The gain or loss is new asset or be treated as a asset or recognized as the difference liability the new separate sale and liability between the proceeds and the financial purchase – the carrying amount of the financial instrument is accounting would asset sold plus the fair value of recognized at fair follow the legal any new liability assumed, minus value. If the fair form of the the fair value of any new financial value cannot be transaction. assets acquired, plus/minus any measured reliably, adjustments that had previously it is recognized at been reported in equity to reflect the net book value fair value. of the replaced financial instrument. If the fair value of the new financial asset cannot be measured reliably, its initial carrying amount is zero and a gain or loss is recognized equal to the difference between the proceeds and the previous carrying amount of the derecognized asset plus/minus any prior adjustments reported in equity to reflect the fair value of that asset

If the fair value of the new liability cannot be measured reliably, its initial carrying amount should be such that no gain is recognized on the transaction and if IAS 37 so requires, a loss should be recognized.

Derecognizi Financial liabilities are removed Not specified Comparable to Financial liabilities Comparable to IAS Comparable to Comparable to IAS Comparable to Not defined. Not defined. Not specified. Comparable to IAS Not specified. Comparable to IAS No SAS covers ng a from the balance sheet when IAS. are removed from IAS. IAS. this area, use IAS. financial extinguished e.g. discharged, the balance sheet liability cancelled or expired. when settled or offset. The difference between the carrying amount of a liability extinguished or transferred to another party, including related unamortized costs, and the amount paid for its should be included in net profit or loss for the period.

Measureme A financial asset or liability is Not specified A financial asset or A financial asset or Comparable to IAS Regulations Comparable to Comparable to Not defined. Not defined Not specified. Comparable to IAS Not specified. A financial asset or No SAS covers nt initially recognized at cost, which liability is initially liability is initially typically state that IAS. IAS. liability is initially this area, use IAS. is the fair value of the recognized at cost, recognized at cost, such assets are recognized at cost, consideration given or received. which is the fair which is the carried at cost less which is the fair

Transaction costs are included in value of the carrying amount of any provision for a value of the the initial measurement of consideration the consideration decline in value. consideration financial assets or liabilities. given or received. given or received. given or received. All direct costs Transaction costs Transaction costs Transaction costs which can be are not included in are typically are NOT included Subsequent measurement is measured reliably the initial expensed. in the initial dependent on the classification of are included in the measurement of measurement of a financial asset

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a financial asset. initial financial assets or financial assets or measurement of liabilities. liabilities. financial assets or Financial assets held for trading liabilities. Subsequently all or sale which have a quoted types of financial Subsequent market price in an active market Subsequently all assets are measurement of are measured at fair values types of financial measured at cost. the assets cannot without any deduction for instruments are exceed cost transaction costs that may incur measured at fair Note1. Loans are decreased by on sale or other disposal. value with the subject to review subsequent following for provisioning. installments, there can be adjustment If a financial asset required to be exceptions: Note2. Financial to decrease value measured at fair value has a fair • assets and of the asset when value below zero, it is accounted instruments liabilities in foreign there exist for as a financial liability. which are not quoted on a currencies are indications of stock revalued at decrease in value Financial assets not held for exchange; balance sheet date of the asset. trading or sale that have a fixed at current official Adjustment should maturity shall be measured at • instruments exchange rate of be made via amortized costs using the for which fair the National Bank. provision posted effective interest method. value cannot The revaluation through P&L be measured gains and losses reliably; are deferred in the Those that do not have a fixed following way: net Foreign exchange maturity are recognized at cost. • instruments foreign exchange losses and gains that have difference for a related to assets and liabilities at the Note. All financial assets are been issued period is deferred balance sheet date subject to review for impairment. by the and monthly enterprise written off to PL (unrealized foreign and are not account in the exchange Any foreign exchange gains and held for amount equal to 10 differences) are losses on monetary financial resale. % of cost of goods posted to special assets are reported in net profit or sold which is accounts in the loss regardless of how the Note1. Loans are charged to balance sheet. A change in the fair value of the subject to review expenses during provision for instrument is reported under this for provisioning. the respective unrealized foreign Standard. Foreign exchange period. exchange losses is gains and losses on non- Note2. Financial created, which will monetary items are reported assets and form part of together with any changes in fair liabilities in foreign liabilities. value. currencies are revalued at balance sheet date In banks, monetary at current official assets and exchange rate of liabilities are translated using the National Bank. The revaluation the current gains and losses exchange rate are recorded in the valid at the profit and loss balance sheet date accounts. and such unrealized gains or losses are recognized as a gain or loss in the P&L. Trading assets (including off-balance sheet instruments) are provisioned so that they reflect fair market values (but not above value of initial measurement).

Measureme The held-to-maturity classification Not specified Not specified. The held-to- Comparable to IAS Concepts not Comparable to IAS Comparable to Not defined. Not defined. Not specified. Comparable to Not specified. Held to maturity No SAS covers nt of held to is an exception, but only if the maturity defined in (EASB, Annual IAS. IAS. investment is not this area, use IAS. maturity enterprise has the positive intent instruments are domestic Accounts of Credit specified. Refer to investments and ability to hold the investment measured at cost. legislation. Institutions). the general to maturity. measurement mentioned above. Note. Most equity securities cannot be held-to-maturity because they have an indefinite life or the amounts that may be received are not predetermined.

A financial asset that is puttable satisfies the criteria if the holder

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has no intent of exercising the put feature before maturity.

A financial asset that is callable by the issuer satisfies the criteria if the holder would recover substantially all of its carrying amount. If not, the financial asset is not classified as held-to- maturity.

If the enterprise has during the current or two preceding financial years sold, transferred, or exercised a put option on more than an insignificant amount of held-to-maturity investments before maturity, the enterprise is precluded form classifying financial assets as held-to maturity.

If the enterprise dose not have the financial resources to continue to finance the investment or is subject to existing legal or other constraints that could frustrate its intentions, the ability to hold the investment to maturity is not demonstrated.

If there is a change in intent or the ability to retain the investment until maturity, the investment is restated to fair value and the difference between the carrying amount and fair value is reported as a gain or loss in a manner appropriate to the investments new classification.

If it is no longer appropriate to report a financial asset at fair value, the fair value carrying amount becomes its new amortized cost. If the financial asset has a fixed maturity and gains/losses were previously recognized in equity, the difference between the new amortized cost and maturity amount is amortized over the remaining life of the financial asset. If the financial asset does not have a fixed maturity, previous gains/losses recognized in equity enter into the determination of net profit and loss on disposal.

Subsequent Financial liabilities held for trading Not specified. Subsequently Subsequently Comparable to IAS Concepts not Comparable to Comparable to Not defined. Not defined Not specified. Comparable to Not specified. Liabilities held for No SAS covers measureme and derivatives are measured at financial liabilities financial liabilities defined in IAS. IAS. IAS. trading are not this area, use IAS. nt of fair value except for those to be are measured at are measured at domestic defined in financial settled by the delivery of an fair value. fair value. legislation. regulations. liability unquoted equity instrument with a Liabilities are reliable measure of fair value. usually measured at initial nominal value. Other financial liabilities are recognized at amortized cost. Foreign exchange losses and gains Foreign exchange gains and related to assets losses on monetary financial and liabilities at the assets are reported in net profit or balance sheet date loss regardless of how the (unrealized foreign change in the fair value of the exchange instrument is reported under this differences) are Standard. Foreign exchange posted to special gains and losses on non

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gains and losses on non- accounts in the monetary items are reported balance sheet. A together with any changes in fair provision for value. unrealized foreign exchange losses is created, which forms part of liabilities.

It is posted directly to P&L when liabilities are settled.

In banks, accounting treatment is comparable to IAS.

Gains/losse A gain/loss on a financial Not specified A gain/loss on a Not specified Comparable to IAS Concepts not Comparable to IAS Comparable to Not defined. Not defined. Not specified. Not specified Not specified. The same, but not No SAS covers s on asset/liability held for trading is financial defined in (EASB, Annual IAS. above original this area, use IAS. remeasurem included in net profit or loss when asset/liability is domestic Accounts of Credit cost. ent to fair it arises. included in net legislation. Institutions). value profit or loss when In banks, it arises. A gain/loss on a financial accounting asset/liability available for sale is treatment is either included in net income or comparable to IAS. loss for the period; or

• Recognized directly in equity, through the statement of changes in equity until the financial asset is sold, collected or disposed of or determined to be impaired. Upon the occurrence of these events, the cumulative gain or loss is included in net profit or loss for the period.

Note. Either a or b must be applied to all available-for-sale financial assets.

Gains/losse A gain/loss is recognized in net Not specified A gain/loss is A gain/loss is Comparable to Comparable to Comparable to IAS Comparable to Not defined. Not defined Not specified. Not specified Not specified. Comparable to No SAS covers s on income or loss when the financial recognized in net recognized in net IAS. IAS. IAS. IAS. this area, use IAS. assets/liabili asset or liability is derecognized income or loss income or loss ties at cost or impaired. when the financial when the financial asset or liability is asset or liability is derecognized. derecognized.

Impairment If there is evidence of impairment: Not specified The statutory rules The statutory rules Comparable to IAS Comparable to Comparable to IAS Comparable to Not defined. Not defined Not specified. Comparable to IAS Not specified. There is no No SAS covers of financial do not prescribe do not prescribe IAS. IAS. description of this area, use IAS. assets write-downs of the write-downs of the impairment, but the • recoverable amount is carried at instruments to instruments to requirement for estimated: cost recoverable recoverable providing for any • carrying amount is reduced to amount in case of amount in case of decrease in value recoverable amount and the impairment. impairment. does exist as a difference included in net result of prudence profit/loss for the period. concept.

If circumstances change, the If circumstances write-down is reversed. The change, the reversal may not exceed what provision is amortized amount would have reversed. The been had the impairment not reversal may not been recognized. exceed the original cost decreased by subsequent installments.

Impairment If there is evidence that held for Not specified Not specified. Not specified. Comparable to IAS Comparable to Comparable to IAS Comparable to Not defined. Not defined Not specified. Comparable to IAS Not specified. All financial assets No SAS covers of financial sale financial assets are impaired, IAS. IAS. carried at cost – this area, use IAS. assets any fair value losses previously see above. carried at recognized directly in equity are fair value removed from equity and reported in net profit/loss for the period.

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The amount removed is the difference between acquisition cost and current fair value (equity instruments) or recoverable amount (debt instruments), less any impairment loss previously recognized in profit or loss.

If conditions change, the write- down is reversed and the amount of the reversal included in net profit or loss for the period.

Hedging Hedging relationships: Not specified Hedging No statutory rules Comparable to Not defined in Comparable to Comparable to Not defined. Not defined Not specified. Not specified Not specified. No regulation for No SAS covers relationship relationships: exist in this area. IAS. domestic IAS. IAS. hedge accounting. this area, use IAS. s legislation and • fair value hedge – hedge of regulations. exposure to changes in fair • fair value hedge value of a recognized asset or – hedge of liability (or portion) that is exposure to attributable to a particular risk changes in fair and will effect net income or value of a loss recognized asset or liability (or • cash flow hedge – hedge of the portion) that is exposure to variability in cash attributable to a flows attributable to a particular particular risk risk or a forecasted transaction and will effect and that will affect net profit or net income or loss loss;

Note. A hedge of an • cash flow hedge unrecognized firm commitment to – hedge of the buy or sell an asset at a fixed exposure to price in the enterprise’s reporting variability in currency is accounted for as a cash flows cash flow hedge even though it attributable to a has a fair value exposure. particular risk or a forecasted Hedge of a net investment on a transaction and foreign entity – a hedge as that will affect defined in IAS 21, Effects of net profit or loss. Changes in Foreign Exchange Hedge of a net Rates investment in a foreign entity is accounted for as cash flow hedge.

Hedge Hedge accounting recognizes the Not specified. Comparable to No statutory rules Comparable to See above. Comparable to Comparable to Not defined. Not defined Not specified. Not specified Not specified. No regulation for No SAS covers accounting symmetrically offsetting effects on IAS. exist in this area. IAS. IAS. IAS. hedge accounting. this area, use IAS. net profit or loss of changes in the fair values of the hedging instrument and items being hedged.

A hedging relationship qualifies for hedge accounting if all the following conditions are met:

• at the inception of the hedge - formal documentation which identifies the hedging instrument, the hedged item, the nature of the risk to be hedged and, and how the hedging instrument’s effectiveness will be assessed

Note. To qualify the hedge must relate to a specific risk – not merely to overall business risks

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and must ultimately effect net profit or loss.

• the hedge is expected to be highly effective, consistent with the originally documented risk strategy

• for cash flow hedges, a forecasted transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows that will ultimately effect net profit or loss;

• the effectiveness of the hedge can be reliably measured;

• the hedge was assessed on an ongoing basis and determined to be effective during the reporting period

Hedge A hedge is highly effective, if, at Not specified A hedge is highly No statutory rules Comparable to See above. Comparable to Comparable to Not defined. Not defined Not specified. Not specified Not specified. No regulation for No SAS covers effectivenes inception and throughout the life effective, if, at exist in this area. IAS. IAS. IAS. hedge accounting. this area, use IAS. s of the hedge, the enterprise can inception and expect changes in fair value of throughout the life cash flows to be almost fully of the hedge, the offset and actual results are within enterprise can a range of 80-125%. expect changes in fair value of cash flows to be almost If the critical terms of the hedging fully offset and instrument and the entire hedged actual results are asset or liability or forecasted within a range of transaction are the same, an 80-125%. enterprise could conclude that the hedge is likely to be effective in offsetting the changes in fair value and cash flows attributable to the risk being hedged, at

inception and until completion.

The time value of money needs to be considered in assessing the effectiveness of the hedge.

Note. The fixed rate on a hedged item need not exactly match the fixed rate on a swap designated as a fair value hedge as a swap’s fair value comes from its net settlements.

Fair value Recognize a gain/loss from Not specified Comparable to No statutory rules Comparable to See above. Comparable to Comparable to Not defined. Not defined Not specified. Not specified Not specified. No regulation for No SAS covers hedges remeasuring the hedging IAS. exist in this area. IAS. IAS. IAS. hedge accounting. this area, use IAS. instrument at fair value in net profit and loss immediately.

Recognize a gain/loss on the

hedged item attributable to the hedged risk as an adjustment to carrying amount and in net profit or loss immediately.

If only certain risks have been hedged, recognize changes in the

fair value in accordance with the hedged items classification

• held for trading - in net profit or loss

• held for sale - in net profit or loss or equity.

Discontinue hedge accounting when the hedging instrument

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expires, is sold, terminated or exercised.

If a hedged interest-bearing financial instrument ceases to be adjusted for changes to fair value, its carrying value is amortized to cost. The adjustment should be fully amortized by maturity.

Cash flow Recognize the portion of the Not specified Recognize the gain No statutory rules Comparable to See above. Comparable to Comparable to Not defined. Not defined Not specified. Not specified Not specified. No regulation for No SAS covers hedges gain/loss determined to be an from the changes exist in this area. IAS. IAS. IAS. hedge accounting. this area, use IAS. effective hedge directly in equity in cash flow hedge through the statement of changes in hedging reserve in equity. or financial income up to the amount of previously The component of equity incurred financial associated with the hedged item expense arising on id adjusted to the lesser of the same hedges.

• the cumulative gain/loss on the Recognize the loss hedging instrument necessary from the changes to offset the cumulative in cash flow hedge changes in expected future as decrease of the cash flows on the hedged item hedging reserve, from inception of the hedge arising on the • the fair value of the cumulative same hedge and changes in expected future the amount cash flows on the hedged item exceeding the from inception of the hedge hedging reserve as financial expense. Recognize any remaining gain/loss on the hedging Hedge accounting instrument in net profit or loss. is discontinued when: Recognize the ineffective portion in net profit or loss if the hedging • the hedging instrument is a derivative. If the instrument hedging instrument is not a expires, is sold, derivative, recognize the terminated or ineffective portion in accordance exercised with the hedged instruments classification – • the hedge no longer meets the • held for trading – in net income criteria for hedge or loss accounting. • • held for sale – in net income or the committed or loss or equity forecasted transaction is no If the hedged firm commitment or longer expected forecasted transaction results in to occur. the recognition of an asset or liability, the associated gains/losses recognized in equity are recognized as a component of acquisition cost or carrying amount of the asset or liability. These amounts initially recognized in equity are recycled to net profit and loss when the asset or liability affects net income or loss.

Recycle amounts recognized in equity in net profit and loss in the same period or periods during which the hedged firm commitment or forecasted transaction affects net profit or loss.

Hedge accounting is discontinued when

the hedging instrument expires, is

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sold, terminated or exercised

the hedge no longer meets the criteria for hedge accounting.

the committed or forecasted transaction is no longer expected to occur

Note. Net cumulative gains/losses reported in equity remain in equity until the committed or forecasted transaction occurs. If the transaction is no longer expected to occur the net cumulative gains/losses recognized in equity are reported in net profit/loss for the period.

Hedge of an Recognize gains/losses as for Not specified Comparable to No statutory rules Comparable to See above. Comparable to Comparable to Not defined. Not defined Not specified. Not specified Not specified. No regulation for No SAS covers investment cash flow hedges. IAS. exist in this area. IAS. IAS. IAS. hedge accounting. this area, use IAS. in a foreign entity The gain/loss on the hedging instrument related to the effective portion if the hedge is classified in the same manner as the foreign currency translation gain/loss.

Disclosure General Not specified. Disclose: No statutory rules Comparable to IAS Comparable to Comparable to Comparable to Not defined. Not defined Not applicable – no Not specified Not specified. General No SAS covers exist in this area. IAS. IAS. IAS. regulations requirement to this area, use IAS. • total amount of included in the describe • methods and significant on-balance ‘Act’. derivatives. assumptions applied in sheet and off- estimating fair values balance sheet financial For public In banks, off • whether gains/losses on instruments by companies balance sheet available-for sale financial type and disclosure assets and assets carried at fair value are classification requirements for liabilities are part recognized in net profit or loss groups; certain groups of of the financial or directly in equity financial statements • the portfolio of instruments are including general • whether ´regular financial prescribed under comment in the way`purchases are accounted instruments; securities and footnotes. for at trade or settlement date exchange • accounting Hedges regulations. policies regarding • description of enterprise’s recognition, financial risk and objectives and policies, valuation of including policy for hedging financial each major type of forecasted instruments and transaction the portfolio of financial • for fair value hedges, cash flow instruments; hedges and hedges of net investment in a foreign entity • all significant financial risks • description of hedge, hedging related to instrument and nature of risks financial instruments and • for forecasted transactions, the portfolio of periods in which the instruments transactions are expected to arising during occur and affect net profit/loss the accounting period; • if gains/losses have been recognized in equity – amounts • total value of recognized and removed during hedged period instruments by Other type and the hedging reserves created • significant items of income, thereof, the expense, and gains/losses average hedging included in net profit and loss or efficiency by as a separate component of type of hedging

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equity instruments and for the company • securitization and repurchase as a whole and agreements the adopted • policy regarding impairment losses and accounting and reversals valuation of hedging efficiency.

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