ORDER OF THE MINISTER OF FINANCE OF THE REPUBLIC OF KAZAKHSTAN

of June 21, 2007 No. 217

About approval of the National accounting standard No. 2

For the purpose of implementation of the subitem 4) of Item 5 of article 20 of the Law of the Republic of Kazakhstan "About financial accounting and the financial reporting" I ORDER:

1. Approve the enclosed National accounting standard No. 2.

2. Declare invalid some resolutions of the National commission of the Republic of Kazakhstan on financial accounting, orders of Department of methodology of financial accounting and audit of the Ministry of Finance of the Republic of Kazakhstan and the Minister of Finance of the Republic of Kazakhstan according to appendix to this order.

3. To department of methodology of management of the state assets of the Ministry of Finance of the Republic of Kazakhstan (Aytzhanova Zh. N.) provide state registration of this order in the Ministry of Justice of the Republic of Kazakhstan and its official publication in the procedure established by the legislation.

4. This order becomes effective since January 1, 2008.

 

Approved by the order of the Minister of Finance of the Republic of Kazakhstan of June 21, 2007, No. 217

National accounting standard No. 2

1. General provisions

1. Scope of application

1. The purpose of national accounting standard No. 2 (further - the Standard), is determination of procedure of financial accounting and creation of the financial reporting:

the subjects of small and medium entrepreneurship (daleesubjekta) determined according to the Law of the Republic of Kazakhstan "About private entrepreneurship";

the non-profit organizations, branches and representations of foreign legal entities registered in the territory of the Republic of Kazakhstan according to the legislation of the Republic of Kazakhstan (further - the subject);

the state companies founded on the right of operational management (the state companies) (further - the subject).

2. Action of this Standard does not extend on:

the small business entities applying according to the tax legislation of the Republic of Kazakhstan special tax regimes for country or farms, legal litsproizvoditel of agricultural products and also on the basis of the simplified declaration;

the subjects of big business determined according to the Law of the Republic of Kazakhstan "About private entrepreneurship";

organizations of public interest;

the financial organizations and special finance companies created according to the legislation of the Republic of Kazakhstan on securitization which state regulation is performed by National Bank of the Republic of Kazakhstan.

3. In this Standard the following concepts are used:

1) asset - the resource controlled by the individual entrepreneur or the organization as a result of last events from whom receipt of future economic benefits is expected;

2) depreciation - systematic distribution of depreciable cost of asset throughout the term of its useful use;

3) associated organization - the organization in which the investor has considerable influence, but which is not either the affiliated organization, or joint activities of the investor;

4) depreciable cost is the cost of asset or other size reflected in the financial reporting instead of cost, less its salvage value;

5) asset type - group of the assets similar on nature and application in activities of the subject;

6) money - cash on hand and on-demand deposits;

7) cash flow - inflows and cash outflows and cash equivalents;

8) minority share - part of profit or loss and net assets of the affiliated organization which falls to shares in the capital which the parent organization does not own directly or indirectly through the affiliated organizations;

9) salvage value (asset) - estimated amount which the subject could receive now in case of asset retirement after deduction of estimated costs on disposal if the asset was already rather old, and its condition it, as expected for the end of term of its useful use;

10) the cash flow statement - the financial statement containing information on changes of money and cash equivalents of the subject for the period in which cash flow from operating, investing activities and activities for financing separately is reflected;

11) transaction of the payment based on shares, calculation for which is made by money - transaction of the payment based on shares in case of which the organization acquires goods or services by adoption of the obligation in transfer of money or other assets to the supplier of these goods or services in the amounts based on the price (or costs) shares or other equity instruments of the organization;

12) interim financial statements - the financial reporting containing full range of financial statements or set of the compressed financial statements for the intermediate period;

13) the intermediate period - the financial accounting period which is shorter than complete financial year;

14) transaction of the payment based on shares - transaction in which the organization receives goods or services as compensation for equity instruments of the organization (including shares or share options) or acquires goods or services by adoption of obligations to the supplier of these goods or services in the size of the amounts which are based on the share price or other equity instruments of the company;

15) cash equivalents - short-term highly liquid investments, readily convertible in known cash amount and changes in value which are put insignificant risk;

16) current tax - the tax amount on profit which is subject to payment (compensation) concerning taxable profit (tax loss) for current period;

17) agricultural activities - the activities of the subject directed to management of transformation of biological assets for the purpose of receipt of agricultural products or additional biological assets for sale;

18) agricultural products - products collected from biological assets of the subject;

19) fair value - the amount for which the asset can be exchanged, on which the obligation can be extinguished or for which the provided equity instrument when making transaction between the knowledgeable, wishing to make such transaction, independent parties can be exchanged;

20) development - use of results of researches or other knowledge during the planning or design of production new or significantly the improved materials, devices, products, processes, systems or services prior to their commercial production or application;

21) balance - the financial statement in which the interrelation of assets, obligations and the subject's capital at a given time is provided;

22) book value - the amount on which the asset or liability is recognized balance;

23) biological asset - animal or plant;

24) debt on defined benefit plan - fair value of obligations on defined benefit plan on reporting date less fair value of assets of the plan for reporting date (if those are available), which are directly intended for execution of these obligations;

25) the parent organization - the organization which has one or several affiliated organizations;

26) estimative obligations - the obligation, uncertain in size or with uncertain completion date;

27) business combination - merging of the separate organizations or businesses in one reporting organization;

28) the obligation on defined benefit plan (present value) - present value of the expected future payments necessary for obligation fulfillment arising in connection with services of workers in current and the last periods, without deduction of assets of the plan;

29) transaction between the related parties - transfer of resources, services or obligations between the related parties irrespective of whether payment is made or not;

30) pension plans with the established fees - plans of remunerations upon termination of labor activity within which the subject pays fees in the fixed size to the certain subject (fund) and does not incur the legal or following from practice obligations on payment of additional contributions or direct payment of employee benefits in that case when the fund has available no sufficient assets for payment of all employee benefits relating to services of workers in current and preceding periods;

31) defined benefit plans - plans of remunerations upon termination of labor activity, different from pension plans with the established fees;

32) joint business - the contractual agreement under which two or several parties perform the economic activity which is subject to joint control. Joint businesses can be to take the form jointly of controlled assets, jointly controlled activities or jointly the controlled organizations;

33) jointly the controlled organizations - joint activities which assumes organization of corporation, partnership or other organization in which each of participants of joint activities has the share. The organization conducts activities in the same way as other organizations except that the contractual agreement between participants of joint activities establishes joint control over economic activity of the organization;

34) joint control - the distribution of control defined by the agreement over economic activity. Exists only when the strategic finance and operational solutions relating to these activities require unanimous consent of the parties jointly having control (participants of joint activities);

35) present value - the current estimation of the discounted cost of future net cash flows in the course of ordinary activities;

36) method of the predicted conventional unit - method of actuarial assessment which considers every period services as the basis for increase in the right to additional unit of remuneration and measures each unit separately for the purpose of forming of the final obligation (sometimes called by method of the added remuneration in proportion distributed for service or method of remuneration/service life);

37) accrual basis financial accounting - results of transactions and other events are recognized when they arise (but not during the obtaining or payment of money or their equivalents), both are reflected in accounting records and join in financial statements of those accounting periods which they treat;

38) goodwill - future economic benefits from assets which do not give in to individual identification and separate recognition;

39) fair presentation - fair representation of results of transactions, other events and circumstances according to determinations and recognition criteria of assets, obligations, income and expenses;

40) the affiliated organization - the organization which is controlled by other organization known as the parent organization;

41) reporting currency - currency in which financial statements are submitted;

42) remunerations upon termination of labor the deyatelnostivoznagrazhdeniye to workers (except dismissal wages) which are subject to payment upon termination of labor activity;

43) plans of remunerations upon termination of labor to deyatelnostiofitsialnya or unofficial agreements according to which the subject provides remunerations to one or several workers upon termination of them labor activity;

44) reporting date - the end of the latest period covered by financial statements or interim financial statements;

45) the accounting period - the period covered by financial statements or interim financial statements;

46) change in estimation - adjustment of asset carrying amount or the obligation, or the amount of periodic consumption of asset which results from assessment of current status of assets and liabilities and the expected future benefits and obligations connected with assets and liabilities. Changes in estimations result from new information or succession of events and, respectively, are not adjustments of mistakes;

47) notes (to financial statements) - notes contain information in addition to information provided in balance, the profit and loss statement, the statement of changes in equity and the cash flow statement. In notes the narrative description or disaggregation of Articles opened in these reports and information on Articles which are not subject to recognition in these reports is given;

48) transaction of the payment based on shares, calculation for which is made by equity instruments - transaction of the payment based on shares in case of which the organization receives goods or services as compensation for equity instruments of the company (including shares or share options);

49) useful life - period of time during which, as expected, the asset will be suitable for use by the subject; either certain product quantity or similar indicator which the subject assumes to receive by means of this asset;

50) real estate investments - the real estate (the earth or the building, or part of the building, or both) which is at the disposal (the owner or the lessee under the agreement of finance lease) for the purpose of receipt of lease payments or increase in capital value or that and another, but not for:

uses in production or delivery of goods, rendering services, in the administrative purposes;

sales during regular economic activity;

51) assets of the plan (pension plan) - the assets of fund of long-term employee benefits and insurance policies meeting certain requirements according to IFRS (IAS) 19 of "Employee benefit";

52) separate financial statements - the financial statements submitted by the parent organization, the investor of associated organization or the participant of joint activities in jointly controlled organization in which investments are considered on the basis of share of direct equity participation, but not on the basis of the provided results and net assets of investee. If the investor of associated organization or the participant of joint activities is not also the parent organization, then its financial statements does not fall under determination of separate financial statements;

53) lease - the agreement according to which the lessor gives to the lessee in exchange for payment or payment series right to use of asset during the approved period of time;

54) financial statements of general purpose - the financial statements intended for satisfaction of total information requirements of wide range of users, such as shareholders, creditors, workers and society in general;

55) plans (pension) groups of employers - pension plans with the established fees (except public pension plans) or defined benefit plans (except public pension plans), which:

merge the assets brought by the different organizations which are not under general control;

use these assets for provision of remunerations to the staff of several organizations provided that fees and the amount of remunerations are determined regardless of in what organization the employees receiving them are employed;

56) researches - the initial and planned researches undertaken with perspective of receipt of new scientific or technical knowledge;

57) investing activities - acquisition and disposal of the non-current assets and other investments which are not relating to cash equivalents;

58) the capital - the share in assets of the individual entrepreneur or the organization remaining after deduction of all obligations;

59) the income - increase in economic benefits during the accounting period in the form of inflow or increments of assets or reduction of obligations that leads to the increase in the capital other than the increase connected with fees of persons participating in the capital;

60) deferred tax assets - the amounts of the income taxes which are subject to compensation in future periods in the relation:

deductible temporary differences;

carryforward of unused tax losses;

carryforward of unused tax credits;

61) deferred tax liabilities - the amounts of the income taxes which are subject to payment in future periods concerning taxable temporary differences;

62) the statement of changes in equity - the financial report which is submitted by profit or loss for the period, the income and expense items recognized directly within equity for the period, influences of adjustments of mistakes and changes in accounting policy for the period and - depending on format of the statement of changes in equity to which the organization - the amounts of investments, to the made equity holders of the organization, and the amount of the dividends and other distributions paid to them for the period adheres;

63) the report on profit for the period and unallotted the pribylifinansovy report which is submitted by profit or loss and equity changes for the period;

64) employee benefits - all forms of compensation provided by the subject to workers in exchange for the services rendered by them;

65) compound financial instrument - the financial instrument which from the point of view of the issuer contains elements of the obligation and the capital;

66) inventories - assets:

held for sale in the course of ordinary activities;

in production process for such sale;

in the form of raw materials or materials, held for use in production process or in case of provision of services;

67) borrowing costs - the interest and other expenses incurred by the subject in connection with borrowing of means;

68) mistakes - omissions or misstatements in financial statements of the subject for one or several previous periods arising owing to non-use or incorrect use of solid data, which:

was available when financial statements for those periods were approved to release;

it can be expected reasonably to be received and considered during preparation and submission of these financial statements;

69) results of activities - interrelation of the income and expenses of the subject provided in the profit and loss statement;

70) the construction agreement - the agreement which is specially signed on construction of asset or complex of assets which are closely interconnected or interdependent owing to the design, technology and function or their final appointment or use;

71) the firm agreement - the binding agreement on exchange of certain quantity of resources at the specified price in certain day (days) in the future;

72) impairment loss is:

the amount on which book value of inventories exceeds selling price less completion costs and sale, or

the amount on which book value of other non-financial assets exceeds their fair value less costs to sell;

73) the purpose of financial statements - provision of information on financial position, results of activities and cash flow of the subject which is useful for a wide range of users in case of adoption of economic decisions which have no opportunity to demand submission of the reporting constituted taking into account their information requirements;

74) finance lease - lease under the terms of which there is transfer, in essence, of all risks and benefits inherent in the property right to asset. The property right can, both to be transferred, and not to be transferred. Any form of lease other than finance lease is operating lease;

75) financial asset - any asset which is:

money;

equity instrument of other subject;

the right caused by the agreement:

receive money or other financial asset from other subject;

exchange financial assets or financial liabilities with other subject on the terms of potentially profitable to the subject;

the agreement, calculation for which will be or it can be performed by own equity instruments of the subject, and being:

the non-productive tool on which the subject will receive or will shall receive variable quantity of own equity instruments of the subject;

the derivative tool, calculation for which will be or exchange of fixed amount of money or other financial asset for the fixed quantity of own equity instruments of the subject can be made by different way, than. For these purposes own equity instruments of the subject do not turn on the tools which are contracts for obtaining or delivery of own equity instruments by the subject in the future;

76) the financial instrument - the agreement from which the financial asset at one subject and the financial liability or equity instrument at another results;

77) the financial liability - any obligation which is:

the obligation caused by the agreement:

transfer money or other financial asset to other subject;

exchange financial assets or financial liabilities with other subject on the conditions potentially unprofitable for the subject;

the agreement, calculation for which will be or it can be performed by own equity instruments of the subject and:

according to which the subject will provide or will shall provide variable quantity of own equity instruments;

calculation by which will be or can be made by different way, than exchange of fixed amount of money or other financial asset for the fixed quantity of own equity instruments of the subject. For these purposes own equity instruments do not turn on the tools which are contracts for obtaining or delivery of own equity instruments of the subject in the future;

78) financial position - interrelation of the assets, obligations and the capital of the subject provided in balance.

79) financial statements - the structured representation of financial position, financial results of activities and cash flow of the subject;

80) financial activities - activities which lead to changes in the amount of and contributed equity composition and borrowed funds of the subject;

81) elements of financial statements - broad categories of financial results of transactions and other events and circumstances:

the elements which are directly connected with measurement of financial position are assets, obligations and the capital;

the elements which are directly connected with measurement of results of activities are the income and expenses.

82) government subsidies - government assistance in the form of transfer to the subject of resources in exchange for accomplishment in the past or in the future the certain conditions relating to operating activiies of the subject;

83) the state (pension) plan - the pension plans founded by the legislation for scope of all organizations (or all organizations of certain category, for example, specific industry) and managed by national or local government or other organization (for example, the independent body created especially for this purpose), uncontrollable the reporting organization and not being under its influence;

84) intangible asset - the identifiable non-monetary asset which does not have physical shape. Such asset is identifiable when it:

is separable, i.e. it can be separated or allocated from the organization and to sell, transfer, lease or exchange separately or together with the related agreement, asset or liability;

results from contract or other legal rights irrespective of whether it is possible these rights to transfer or separate the subject or other rights and obligations;

85) the obligation - the existing obligation of the individual entrepreneur or the organization arising from last events which settlement will lead to disposal of the resources containing economic benefits;

86) fixed assets - tangible assets, which:

leasing to the third parties, investment or the administrative purposes keep for use in production or delivery of goods or services;

as expected, will be used within more than one period;

87) operating activiies - the main revenue-generating activities of the subject and other activities other than investing activities and activities for financing;

88) operating lease - lease under the terms of which there is no transfer, in essence, of all risks and benefits inherent in the property right. Any form of lease other than operating lease is finance lease;

89) operating segment - the operating segment is the subject's component:

which performs economic activity during which he can gain income and incur expenses (including the income and expenses relating to transactions with other components of the subject),

whose results of activities are usually considered by the management official of the organization responsible for adoption of operational decisions, for decision making on resource allocation on segment and estimates of results of its activities, and

for which there is separate financial information;

90) imputed rate of percent - the most accurately determined size from:

the prevailing rate for the similar financial instrument of the issuer with the similar rating of solvency;

interest rate which application for discounting of the nominal amount of the financial instrument allows to receive the current selling prices of goods or services in case of their payment without delay;

91) measurement - process of determination of sums of money on which elements of financial statements shall be recognized and be reflected in balance and the profit and loss statement;

92) effective interest rate method - method of calculation of depreciated cost of financial asset or the financial liability (or groups of financial assets or financial liabilities) and distributions of interest income or interest expense to the corresponding period;

93) the income tax - the corporate income tax which is subject to payment in the budget (to return from the budget) concerning the taxable income (tax loss) according to the tax legislation of the Republic of Kazakhstan;

94) the obligation following from practice - the obligation following from actions of the subject in cases when:

common practice of the last activities announced by policy or rather specific current statement the subject specified to other parties that he will assume certain obligations;

as a result the subject created at these parties reasonable expectations as regards he will fulfill the assumed duties;

95) the profit and loss statement - the financial statement in which information on results of activities of the subject, that is interrelation of the income and expenses is provided;

96) profit - residual which remains after deduction of expenses from the income;

97) prospective application (change in accounting policy) application of new accounting policy to the transactions, other events and circumstances taking place after date for which the policy exchanged;

98) the effective rate of percent is rate as a result of which application for discounting of settlement future money payments or receipts throughout the expected term of existence of the financial instrument or where it is pertinent, shorter period, the received size is equal to net book value of financial asset or the financial liability;

99) retrospective application (change in accounting policy) application of new accounting policy to transactions, other events and circumstances, thus, as though this accounting policy was used always;

100) unconditional remunerations - remunerations, the right to which according to conditions of the pension plan does not depend on further work of employees;

101) the insurance contract - the agreement under which one party (insurer) accepts significant insurance risk from other party (the holder of the policy), agreeing to provide compensation to the holder of the policy if the stipulated future event which emergence vaguely (insured event), will adversely influence the holder of the policy;

102) tax base - the size of asset, the obligation or equity instrument determined according to the existing tax legislation;

103) taxable temporary differences - temporary differences of which the taxable amounts in case of taxable profit determination (tax loss) of future periods in which the asset carrying amount is compensated are result or book value of the obligation is settled;

104) the postponed tax expense (the income from compensation of tax) the expense amount on tax (the income from compensation of tax) included in calculation of profit or loss for the period concerning changes of deferred tax assets and deferred tax liabilities during the period.

105) expenses on the tax discharge (the income from compensation of tax) the total value included in calculation of profit or loss for the period concerning current tax and the deferred tax;

106) financial asset, available for sale - asset which book value will be recovered generally by sale, but not as a result of the continuing use;

107) the loans which are subject to payment - financial liabilities, except for trade short-term receivables with usual conditions of payment deferral;

108) derecognition - exception of earlier recognized financial asset or the financial liability of balance of the subject;

109) discontinued operation - the component of the subject which either was disposed or is classified as held for sale and:

represents separate considerable type of activity or the geographical area of conducting activities;

is part of the unified coordinated plan of disposal of separate considerable type of activity or the geographical area of conducting activities;

is the affiliated organization acquired only for the purpose of the subsequent resale;

110) recognition - process of inclusion in balance or the profit and loss statement of Article which corresponds to determination of one of elements and meets the following recognition criteria:

there is probability that any future economic benefit connected with Article will be received or provided by the subject;

actual costs or cost of Article can be reliably measured;

111) temporary differences are differences between asset carrying amount or obligations and their tax base;

112) date of provision - date for which the subject and other party (including the worker) sign the agreement on the payment based on shares provided that the subject and the counter party have identical understanding of terms of agreement. For date of provision the subject grants to the counter party the right to money, other assets or equity instruments of the organization on condition of observance of certain conditions of transition if those are available. If this agreement is subject to approval (for example, shareholders), then date of provision is date when this approval was received;

113) control (over the organization) - the right to manage financial and operational policy of the organization to receive benefits from its activities;

114) functional currency - currency of the main economic environment in which the subject functions;

115) the hedging instrument - for the purposes of hedging accounting, according to Section 11 of this Standard, hedging instrument is the financial instrument which:

represents the interest rate swap answering to conditions of Item 193 of this Standard; currency swap or the forward exchange contract which is tied to the same foreign currency, as the hedged Article; or the forward contract attached besides to goods, as the hedged Article;

meets other conditions of Item 192 of this Standard. At the same time the organization which decided to apply IFRS (IAS) 39 "Financial instruments - recognition and assessment" for accounting of financial instruments, shall use determination of accounting of hedging from these IFRS, but not this determination;

116) international accounting standards (further - IFRS) - the accounting standards approved by Fund of Committee of international accounting standards;

117) the hedged Article - for the purposes of hedging accounting, according to Section 11 of this Standard, the hedged Article is:

interest risk on the debt instrument measured on depreciated cost;

currency risk under the firm agreement or the high-probable predicted transaction;

risk of the change in price of goods with easily definable market price which is owned by the subject or which shall sell or acquire according to the firm agreement or as a result of the high-probable predicted transaction;

currency risk on net amount of investment into foreign activities;

118) efficiency of hedging - degree in which the changes of fair value or cash flows of the hedged Article relating to the hedged risk are compensated by changes of fair value or cash flows of hedging instrument;

119) deductible temporary differences - temporary differences of which deductions in case of taxable profit determination (tax loss) of future periods in which the asset carrying amount is compensated are result or book value of the obligation is settled;

120) dismissal wages - the employee benefits which are result:

solutions of subject to dismiss the worker before achievement of retirement age by it, or

decisions of the worker on voluntary consent with redundancy in exchange for such remunerations;

121) group on disposal - the group of assets which is subject to disposal by sale or otherwise together as group as a result of one transaction, and the obligations which are directly connected with assets which will be transferred in the course of this transaction;

122) consolidated financial statements - group financial statements of the organizations, consisting of the parent organization and one or more affiliated organizations;

123) expenses - reduction of economic benefits during the accounting period in the form of outflow or reduction of assets or emergence of obligations which lead to the capital reduction other than the reduction connected with distributions to persons participating in the capital;

124) contingent asset - possible asset which results from last events and which availability will be confirmed only with approach or not approach of one or more uncertain future events which not completely are under control of the subject;

125) contingent obligation is:

the possible obligation which results from last events and which availability will be confirmed only with approach or not approach of one or several uncertain future events which not completely are under control of the subject;

the existing obligation which results from last events, but is not recognized as:

there is no probability that disposal of the resources concluding economic benefits for settlement of the obligation will be required; or

the size of the obligation cannot be measured with sufficient degree of reliability;

126) the conditional amount - the quantity of monetary units, bushels, pounds or other units specified in the agreement which is the financial instrument;

127) almost impracticable - application of any requirement is represented almost impracticable when the subject cannot apply it after all necessary attempts to make it;

2. Concept and basic principles

2. The purpose of financial statements and quality characteristics of information provided in financial statements

4. The purpose of financial statements of subjects is provision of information on financial position, financial results and cash flow of subjects useful for a wide range of users who have no opportunity to require the financial statements reflecting specifics of their information requirements. For achievement of this purpose financial statements also show results of resource management, entrusted the subject's management.

Quality characteristics are shown to the financial reporting for the purpose of receipt of information, useful to users. The main quality characteristics are clearness, relevance, reliability and comparability.

3. Clearness

5. Information provided in financial statements shall be provided so that it was clear to the users having sufficient knowledge of business, economic activity and financial accounting and desire to study information with due diligence. Nevertheless, the aforesaid shall not be justification not to include pertinent information on reasons of its excessive complexity for perception by some users.

4. Relevance

6. Information provided in financial statements shall be pertinent taking into account needs of users in case of decision making. Information has quality of relevance when it influences economic decisions of users, helping them to estimate last, these or future events either confirming, or adjusting their last estimates.

5. Materiality

7. Information is considered essential if its omission or misstatement can influence the economic decisions of users made based on financial statements. Materiality depends on the size of Article or mistake considered in specific circumstances of its omission or misstatement.

6. Reliability

8. Information provided in financial statements shall be reliable. Information is reliable when it does not contain material mistakes, it is not prejudiced; and authentically represents what it aims to provide or what it can represent according to reasonable expectations. Financial statements will comprise bias when matching or submission of information containing in such reports, is directed to rendering influence on decision making or forming of judgment for the purpose of achievement of the planned result or effects.

7. Content priority over form

9. Transactions and other circumstances and events are subject to accounting and representation in the reporting according to their content and economic essence, and, not just proceeding from their legal form. It allows to increase reliability of financial statements.

8. Discretion

10. During activities of the subject different emergence of uncertainty concerning many events and circumstances is inevitable. Nature and size of such uncertainty should be disclosed in financial statements according to discretion reasons. Discretion is observance of certain degree of care in case of application of the value judgment necessary for implementation of estimations in the conditions of uncertainty in order that assets or the income were not overestimated, and obligations or expenses - are underestimated. Nevertheless, reasons of discretion shall not be used for intended understating of assets or revenue or intended overestimate of obligations or expenses. In other words, discretion is not justification for bias.

9. Completeness

11. To be reliable, information shall be provided in financial statements in full, taking into account reasons of materiality and costs for submission of such information. The non-inclusion of any data can make information false or misleading and, therefore, unreliable and insufficient from the point of view of its relevance.

10. Comparability

12. Users shall have opportunity to compare financial statements of the subject for the different periods to determine tendencies in its financial position and results of activities. Users also shall have opportunity to compare financial statements of different subjects to estimate their relative financial position, results of activities and cash flow. Thus, measurement and reflection of financial results of similar transactions and other events and circumstances shall be performed consistently for the subject throughout its existence and is consecutive for different subjects. In addition, users shall be informed of the accounting policy used in case of creation of financial statements and on changes and consequences of such changes in accounting policy.

11. Timeliness

13. Pertinent financial information is that information which can influence the economic decisions made by users. Timeliness of information consists in its availability during decision making. In case of excessive delay in submission of information it can lose the relevance. The management, perhaps, should find balance between relative advantages of timely reflection in the reporting and provision of solid data. In case of determination of balance between relevance and reliability the reason of maximization of degree of requirements satisfaction of users in case of adoption of economic decisions by them shall be fundamental reason.

12. Balance between benefits and costs

14. The benefits taken from information shall exceed costs on its provision. Assessment of benefits and costs is based, substantially, on use of subjective judgments. Moreover, costs absolutely optionally lay down on those users who receive benefits. In case of determination of balance between costs and benefits the subject should consider that benefits can be also received from submission of information also by wide range of external users.

13. Financial position

15. Financial position of the subject are its assets, obligations and equity as of certain date. The elements of financial statements which are directly connected with measurement of financial position are assets, obligations and equity. They are determined as follows:

1) asset - the resources controlled by the individual entrepreneur or the organization as a result of last events from which receipt of future economic benefits is expected;

2) the obligation is the existing obligation of the individual entrepreneur or the organization arising from last events which settlement will lead to disposal of the resources containing economic benefits;

3) the capital - the share in assets of the individual entrepreneur or the organization remaining after deduction of all obligations.

16. Some Articles corresponding to determination of asset or liability can not be recognized quality of those in the balance sheet in case of failure to carry out by such Articles of the recognition criteria stated in Items 27-32 of this Standard. In particular, there shall be sufficient degree of confidence in obtaining or outflow of economic benefits in the future before to recognize asset or liability.

14. Assets

17. The future economic benefit concluded in asset is opportunity directly or indirectly to promote receipt to the subject of money and their equivalents. Such cash receipts can be consequence of use or asset realization.

18. Many assets, for example, fixed assets, have physical shape. Nevertheless, physical shape is not obligatory property of asset. Some assets are non-material.

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