BASIC DIFFERENCES BETWEEN SOME LBAS AND IFRS/IAS

Intangible Fixed Assets

According to LBAS 13 ‘Intangible Assets’, an intangible asset is an “identifiable non-monetary asset without physical substance disposed by the enterprise expecting to obtain direct and indirect economic benefits from the use of such asset”. Intangible assets should be recognised if they satisfy the definition of intangible assets and the following three recognition criteria:

1. The enterprise can reasonably expect to obtain future economic benefits from the assets;
2. The historical (production) cost of the assets can be reliably measured and distinguished from the value of other assets;

3.       The enterprise can dispose such assets, control them or limit the others’ right to use such assets. Intangible assets are carried at the acquisition (production) cost²¹.

Overall, LBAS 13 is consistent with IAS 38 ‘Intangible Assets’ but the difference between them is that intangible assets cannot be revaluated under LBAS 13.

Tangible Fixed Assets (Non-Current Tangible Assets)

LBAS 12 identifies non-current tangible assets as “tangible assets which rendering economic benefits to the enterprise for a period exceeding one year and the acquisition (production) costs of which is not lower than the minimum value of non-current tangible assets estimated by the enterprise”.

Although main provisions of the standard are very similar to those of IAS 16 ‘Property, Plant and Equipment’ and IAS 40 ‘Investment Property’, there are some differences. So, LBAS 12 defines an additional criterion for recognition of non-current tangible assets. That is the acquisition (production) cost of the asset should be not lower than the minimum cost of non-current tangible asset estimated by an enterprise per each group of assets. The next difference is that interest is not included in the asset acquisition (production) cost. It is recorded under expenses of respective periods. In addition, unused non-current tangible assets including preserved assets are exempt from calculation of depreciation. Also, there are some differences in the principles of accounting of non-current tangible assets acquired in exchange for other assets, e.g. no gain or loss is recognised on the transaction when “the value of assets is not specified in the exchange agreement, and assets of the same or similar designation, nature and value being exchanged are used in the same line of business” ²¹.

Inventories

The main difference between LBAS 9 ‘Inventories’ and IAS 2‘Inventories’ is that under LBAS 9 it is possible to apply not only the FIFO and weighted average cost methods but also LIFO in some cases. For example, “when the items of inventory which were purchased or produced last are sold first, and consequently the items remaining in inventory at the end of the period are those first purchased or produced” ²¹. The other essential differences do not exist between these standards.

Income Tax

Provisions of LBAS 24 ‘Income Tax’ are consistent with provisions of IAS 12 ‘Income Statement’. LBAS 24 allows enterprises not to apply LBAS 24 if they prepare abridged annual financial statements or if enterprises use complete forms of balance sheet and income statement but their deferred tax amounts are immaterial.

Derivatives, Financial Assets and Financial Liabilities

There are no essential differences between the procedure of recognition of and accounting for derivatives set forth under LBAS 26 ‘Derivatives’ and IAS 32 ‘Financial Instruments: Disclosure and Presentation’ and IAS 39 ‘Financial Instruments: Recognition and Measurement’.

Also, the principles of accounting for financial assets and financial liabilities established under LBAS 18 ‘Financial Assets and Financial Liabilities’ and IAS 39 are very similar. However, for the purpose of recognition and measurement, LBAS 18 classifies financial assets into the following four groups:

·         Intended-for-sale;

·         Held-to-maturity;

·         Originated long-term loans and receivables (including current portion of non-current loans and receivables); and

·         Originated short-term loans and receivables ²¹.

Whereas, according to IAS 39, financial assets are classified in one of the following categories:

·         Financial assets at fair value through profit or loss (this category has two subcategories: designated and held for trading);

·         Available-for-sale financial assets;

·         Loans and receivables;

·         Held-to-maturity investments.

Thus, LBAS 18 does not include the group Available-for-sale financial assets and all financial assets that are not attributed to the categories of Held-to-maturity; Originated long-term loans and receivables; or Originated short-term loans and receivables, are treated as Intended-for-sale and changes in their value are recognised as profit or loss in Income Statement.

Provisions, Changes in Foreign Exchange Rates, and Impairment of Assets

There are no essential differences between LBAS 19 ‘Provision, Contingent Liabilities and Contingent Assets, and Events Occurring after the Balance Sheet Date’ and the corresponding IAS 10 ‘Events After the Balance Sheet Date’ and IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’. Also, the provisions of LBAS 22 ‘Changes in Foreign Exchange Rates’ correspond to the provisions of IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’; and essential differences between LBAS 23 ‘Impairment of Assets’ and IAS 36 ‘Impairment of Assets’ do not exist.