PricewaterhouseCoopers (PwC), in its 2007 Doing Business Guide, states that all entities in Ukraine are required to prepare financial statements in accordance with National Accounting Standards (NASs), which are based on International Financial Reporting Standards (IFRSs). Even though the 2000 Law on Accounting and Financial Reporting stipulates that NASs should not contradict IFRSs, the 31 NASs effective in 2007 differ from IFRSs in practice. With respect to Accounting for Government Grants and Disclosure of Government Assistance, Interim Financial Reporting, Investment Property, and Share-Based Payments, no corresponding NAS has been adopted. Moreover, the existing NASs provide less interpretative guidance, explanations and illustrations than IFRSs, which, according to PwC, ultimately impedes the comparability and quality of financial statements in Ukraine. In its 2005 Investment Guide, KPMG reported that companies listed on the Ukrainian Stock Exchange are required to apply IFRSs, beginning in 2003.

General Overview

According to the 2007 PricewaterhouseCoopers (PwC) Doing Business Guide, all Ukrainian entities have to prepare financial statements in accordance with National Accounting Standards (NASs). As of December 2006, 31 NASs were adopted. The 2000 Law on Accounting and Financial Reporting stipulates that NASs should not contradict International Financial Reporting Standards (IFRSs). PwC points out, however, that NASs and IFRSs differ in practice. PwC states that "there are still areas for which no local standards have been introduced (e.g., Accounting for Government Grants and Disclosure of Government Assistance, Interim Financial Reporting, Investment Property, Share-Based Payments)" (p. 32). The PwC report adds that local standards are often lacking in adequate detail, and omit some of the IFRS disclosure requirements. Further, the PwC adds that NASs offer "less interpretative guidance, explanations, and illustrations than IFRS, which inevitably leads to some confusion in the application of local standards" (p. 32). As a result, the quality and comparability of Ukrainian financial statements are compromised.

The PwC 2007 Doing Business Guide further explains that, as set forth in Ministry of Finance (MoF) Decree No. 291, all Ukrainian entities are required to use the Chart of Accounts. Within this chart, every account is given a title and a numerical symbol and is assigned to a specific class or group. However, small businesses, non-profit non-government organizations, and foreign business entities may apply a simplified set of accounting rules.

According to the 2007 Ukrainian Federation of Professional Accountants and Auditors (UFPAA) self-assessment, the MoF sets the principles and methods of financial reporting in Ukraine. The UFPAA participates in the development of NASs and coordinates the translation of IFRSs. It also adopted the 2004 version of the IFAC Code of Ethics and, as of 2007, is in the process of adopting the 2006 version of the Code. The International Federation of Accountants (IFAC) website lists UFPAA as an associate member of the IFAC.

As stated in the 2005 UFPAA self-assessment, the State Commission on Securities and Stock Exchange (SCSSE) is the supervisor of the securities market, the National Bank of Ukraine (NBU) supervises the banking sector, and the State Commission on the Regulation of Financial Services Markets (SCRFSM) is responsible for the supervision of non-bank financial institutions and insurance companies. According to the 2007 PwC guide, these regulators may issue additional accounting requirements for entities under their supervision. The 2005 KPMG Investment Guide states that companies listed on the Ukrainian Stock Exchange (USE) are required to apply IFRSs beginning in 2003. The UFPAA adds that the USE, the Ukrainian Interbank Currency Exchange (UICE), the Kyiv International Stock Exchange (KISE), and the Donetsk Stock Exchange (DSE) monitor and enforce the compliance of listed entities with financial reporting, accounting, and auditing requirements (2005).

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IFRS 2: Share-based Payment (effective 2005)

NC

According to the 2007 PwC Doing Business Guide, there is no corresponding NAS.

IFRS 3: Business Combinations (effective 2004)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IFRS 4: Insurance Contracts (effective 2006)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IFRS 7: Financial Instruments: Disclosures (effective 2007)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 1: Presentation of Financial Statements (effective 2007)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 2: Inventories (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 7: Cash Flow Statements (effective 1994)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 10: Events after the Reporting Period (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 11: Construction Contracts (effective 1995)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 12: Income Taxes (effective 2001)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 14: Segment Reporting (effective 1998)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 16: Property, Plant and Equipment (effective 2005)

NC

PwC, in its 2007 Doing Business Guide, states that NAS 7 Property, Plant and Equipment allows several depreciation methods, including those provided for under national tax law.

IAS 17: Leases (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 18: Revenue (effective 1995)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 19: Employee Benefits (effective 2006)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

NC

According to the 2007 PwC Doing Business Guide, there is no corresponding NAS.

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 23: Borrowing Costs (effective 1995)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 24: Related Party Disclosures (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 28: Investments in Associates (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 31: Interests in Joint Ventures (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 33: Earnings per Share (effective 2005)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 34: Interim Financial Reporting (effective 1999)

NC

According to the 2007 PwC Doing Business Guide, there is no corresponding NAS.

IAS 36: Impairment of Assets (effective 2004)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 38: Intangible Assets (effective 2004)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.

IAS 40: Investment Property (effective 2005)

NC

According to the 2007 PwC Doing Business Guide, there is no corresponding NAS.

IAS 41: Agriculture (effective 2003)

II

There is insufficient information publicly available as to Ukraine's compliance with this Principle.