Proposed changes to accounting procedures (1)

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08.02.2018

In January 2018 the Cabinet of Ministers received initiatives from two ministries – proposals drafted by the Ministry of Finance (MOF) for amending the Cabinet of Ministers’ Regulation No. 585, Keeping books and organising accounting processes, and a report on keeping books in English and using other currencies in accounting records, drawn up by the Ministry of Economics. This article takes a look at the two documents.
 
 
Amendments to accounting rules
 
Latvia has adopted several pieces of legislation to govern how entities should keep their books and organise their accounting processes. The Accounting Act and Cabinet Regulation No. 585 are regularly reviewed and amended by the responsible institutions, but those amendments have so far been more like additions to changes in other pieces of legislation.
 
The MOF has now drafted proposals for amending Cabinet Regulation No. 585, citing as the main reasons the need to lay down accounting requirements for giving details of services in a supporting document and the need to make transactions traceable.
 
Key amendments are offered as an addition to paragraph 7 of the Regulation, which includes rules for preparing supporting documents. These rules are to be supplemented with paragraphs 7.7 and 7.8, allowing a customer who acquires a service to request that the provider should give information in an external supporting document about any tangible assets used for providing that service (the description as well as the measure and quantity of units used) regardless of whether the customer’s or provider’s tangible assets have been used in providing the service. At the same time, the provider will be required to give information about any tangible assets used for providing the service in an invoice or other external document at the customer’s request, unless the quantity of auxiliary materials or other tangible assets used to provide the service is so negligible that it can only be measured by special techniques or calculations.
 
The second key area being amended is preparing a cost price calculation, which has so far been outside the scope of accounting rules. The MOF proposals provide for supplementing Regulation No. 585 with paragraphs 41.2 and 68.1 as well as amending paragraph 68 to read as follows:
  1. If necessary an entity may draw up an accounting policy to lay down procedures for calculating the cost of goods sold or services rendered and for preparing a calculation of actual expenditure per unit produced or service rendered, and procedures for preparing external and internal supporting documents;
  2. If the entity’s accounting policy lays down procedures for calculating the cost price and for preparing a calculation of actual expenditure, then an accounting review will involve checking that the cost price is calculated and the expenditure calculation prepared correctly; and
  3. An accounting review will involve checking that all business transactions are backed by supporting documents.
The third area being amended is the requirement for conducting physical inventories to count or verify all assets owned and used by the entity, as well as reconciling its receivables and payables. The proposals allow entities to prepare a separate inventory list or another supporting document for any corporeal assets or sets of assets that are not available for counting or verification during the physical inventory, and the management will be allowed to lay down procedures for documenting this in an inventory manual.
 
Find out more on PwC Latvia Tax Reporting and Strategy practice here.
 
(to be continued)
 

 

 
Contacts
Inese Veinberga
inese.veinberga@pwc.com
Tel: +371 67094400
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