Практика МСФЗ 25 травня, 2020

«Vast discussions about licences for accountants continue»

Daiva Čibirienė is the President of the Lithuanian Association of Accountants and Auditors, the oldest and largest professional organization founded in 1990 in Lithuania. This Association is is a member of Accountancy Europe and an associate in IFAC
.We have asked Ms. Čibirienė to answer some questions that interest our readers.



Daiva Čibirienė, the President of the Lithuanian Association of Accountants and Auditors, licenced auditor


How widely are IFRSs applied in Lithuania?

D.Č.:  In Lithuania IFRS are applied by around one hundred entities. It constitutes less than 0.01 % in the total count of active entities that are preparing the financial statements.

Under the legal acts of the Republic of Lithuania, financial reporting in accordance with IFRS is obligatory to the following:

  • Brokerage houses,
  • Regulated market operators,
  • Central Securities Depository of Lithuania
  • Insurance companies,
  • Reinsurance companies,
  • Management companies operating on the basis of the Republic of Lithuania Law on Collective Investment Undertakings, Law on Collective Investment Undertakings Intended for Informed Investors, Law on Management Companies of Collective Investment Undertakings Intended for Professional Investors and Law on the Supplementary Voluntary Accumulation of Pensions,
  • Credit institutions other than credit unions,
  • Consolidated financial statements of listed entities,

Other entities may still choose to apply IFRS. However, those that are not under obligation avoid applying IFRS due to the fact that the national Business Accounting Standards have clear and comprehensive methodical recommendations while those of IFRS are less so and there isn’t an institution that is responsible for the interpretation of IFRS.

Do Lithuanian accountants use English text IFRSs?

D.Č.:  It is difficult to say, but I assume that the accountants mostly use the Lithuanian version of IFRS and only consult the original IFRS in English when encountering any uncertainties.

Are significant differences between international and Lithuanian national standards?

The national Business Accounting Standards applied in Lithuania and IFRS are almost identical. Before the arrival of the new IFRS 16 it was considered that BAS provisions match around 95% of those in IFRS. Currently, since the new IFRS 16 Leases provisions were not transferred to BAS, the difference should have increased and the similarity might now be equal to around 93 %.

It is quite common for foreign entities with subsidiaries in Lithuania to choose to apply BAS and then request an auditor to confirm the differences between BAS and IFRS at the end of the year for consolidation purposes. Often there are no differences or they are insignificant.

The Lithuanian BAS were designed on the basis of the principles of IFRS, which were simplified and adapted to the Lithuanian requirements set forth in the effective legal acts concerning formation of equity capital in an entity and shareholder rights and obligations with regard to equity capital reserves.

There are currently nine significant differences between BAS and IFRS:

  1. Effect of off subsequent events to the recognition of liabilities as either non-current or current. According to BAS, short term liabilities might be recognised as long term liabilities, if it is known, before the financial reporting submit date, that the term of financing agreement will be extended and the agreement will be effective for over a year. This is not the case in IFRS. Here refinanced current loans are recognised as short term liabilities even if at the balance-sheet date it is known that an agreement for loan extension is in place and the following year balance sheet the loan will be recognised as long term liabilities.
  2. BAS provide for the unified format of financial statements, where empty lines cannot be deleted and new ones cannot be added. Groups of income and costs on the basis of related persons are different in BAS and IFRS. BAS are in full conformity with the provisions regarding income groups set forth in the directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013. The structure of explanatory notes is also different, e.g. according to BAS, provisions of the standards do not need to be written down in the explanatory notes and it is not required to clarify in detail how the future changes in the standards will affect the information in the financial statements. Unlike IAS 33, BAS do not require to present information on profit per share in the explanatory notes. Other requirements for disclosures in the explanatory notes are similar.    
  3. Accounting for intangible assets. According to BAS, intangible assets may only be accounted for at acquisition cost and never at revalued amount. According to BAS, intangible assets with indefinite useful life’s are to be amortized, which is not the case in IFRS.
  4. Goodwill is measured differently in BAS. Provisions of IFRS 3 are transferred to BAS only partially. According to BAS, in business combinations the acquirer measures all non-controlling interests in the acquiree following a single principle, i.e. at non-controlling interest’s proportionate share of net identifiable assets. IFRS provides for a second principle of measurement – fair value. According to BAS, goodwill is to be amortised and, according to IAS 36, impairment in value is to be registered. Even though different principles of goodwill recognition are applied, it is possible that the carrying value of goodwill in the financial statements according to BAS will not be different from that in the financial statements prepared in accordance with IFRS.
  5. According to BAS, capitalising interest and borrowing costs as acquisition cost of non-current assets is not permitted. According to BAS, interest and all borrowing costs are recognized as costs when they are incurred.
  6.  Measurement of financial instruments is simpler in BAS. According to BAS, investments in ‘intended for sale’ securities that have no fair value due to not being quoted on active market, are measured at acquisition cost less the impairment in value.
  7. According to BAS, measurement of financial liabilities is based on division between those that are linked to market prices and those that are not. Liabilities linked to market prices are measured at fair value and those that are not linked to market prices are measured at amortized cost.
  8. According to BAS, convertible bonds are registered as liabilities. It is not allowed to register them in equity capital.
  9. According to BAS, lease transactions are recognized as either operating leases or finance leases. There are certain conditions that facilitate transfer from operating lease to finance lease, but they do not exactly match those in IFRS 16. When a lease transaction is recognized as finance lease, both initial and consequent recognitions of an asset are similar to those in IFRS 16.

Lithuanian translation of IFRS for SMEs published on the IASB website. Does this apply the standard in Lithuania?

D.Č.:  IFRS for SMEs are not applied in Lithuania. Lithuanian legal acts do not provide for such possibility.

Are there many difficulties with the VAT-taxation in Lithuanian practice?

D.Č.:  There are no difficulties really. With the exception to this year, as there were changes in the Law on VAT regarding the new requirements for the application of 0 % VAT rate to goods transported from Lithuania to other EU countries. We are used to receiving detailed clarifications from our tax administrator, but the mentioned change is not yet clarified.

I would assume that it is not only in Lithuania that the new requirements regarding the transportation of goods were implemented in 2020, but likely in the VAT laws of all EU member states following the adoption of Council Directive (EU) 2018/1910 of 4 December 2018 amending the VAT Directive 2006/112/EC.

Do Lithuanian educational institutions fully satisfy the business demand on professional accountants?

D.Č.:  In Lithuania professional accountants are trained at universities and in colleges. Practically speaking, the practitioners of accounting profession prepared by colleges are better. Though students at universities are more capable, they are not taught practical application and thus university-educated professional accountants are less convenient to businesses than those educated in colleges. Colleges focus on practical application while universities emphasise theoretical and universal knowledge, which is not exactly on demand in the business world. Lithuanian market is dominated by small businesses. Financial statements of small businesses do not include complex accounting estimates and do not require elaborate disclosures. Having completed their formal education, new accountants normally start at small companies and only move on to larger ones after 5-10 years, which is when the university education would come in handy, only the knowledge might have become obsolete over the years. University-educated professional accountants can apply their knowledge working as bank analysts or auditor’s assistants. Quite often university graduates start as assistants to non-practising professional accountants in order to obtain practical knowledge required in the work of non-practising chief accountant. Compared to employees trained in colleges, those trained at universities are better acquainted with IFRS and technical terms used in accounting standards. However, they do not have practical skills and thus have difficulties merging their knowledge with practical situations and when the need to use the acquired university knowledge finally occurs, much of it is already forgotten and they start learning again. The Lithuanian Association of Accountants and Auditors focuses on extending and maintaining the qualification of accountants who already have 10 or more years of service under their belt. Trainings organised by the Association are sometimes attended by college and university professors. As of 2001 the Association organises the professional accountant examination. In Lithuania examination of similar difficulty is also organised by the Lithuanian Chamber of Auditors. Auditing requires a licence in Lithuania, while almost anyone can pursue accounting. Vast discussions about licences for accountants continue. The Lithuanian state currently chooses to leave the monitoring of quality in accounting services in the hands of vocational associations, membership in which is voluntary and thus it is up to a business itself to decide whether it needs an accountant whose work quality can be attested by an association.

№ 5, 2020  (с. 12)
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