The Albanian legislative act which defines the general
principles and rules for the preparation of accounting
standards, financial statements and accounting records is the
Law on Accounting and Financial Statements (Law No. 9228, dated
April 29 2004).
According to Article 3 of this Law, 'accounting standards'
are the general principles or rules for the normalisation of
accounting, defined by the law, which serve as a basis for the
selection of accounting tools and methods that are applied for
the preparation and presentation of financial statements.
Typically, the National Accounting Council of Albania
translates the standards brought forward by the International
Accounting Standards Board. The standards are then decreed as
valid and effective by the Ministry of Finance. The latest
decree issued by the Ministry of Finance on the topic of
accounting standards was Decree No. 120, approved on November 6
2017, and subsequently published in the Official Gazette in the
same month.
Decree No. 120 issued by the Minister of Finance reflects
the changes that have occurred in the accounting standards,
which include among other things:
- IFRS 4 (insurance contracts);
- IFRS 2 (payments based on shares);
- IFRS 15 (revenues from contracts with
customers); and
- IAS 40 (long-term investment
property).
The changes to the standards entered into force and were
applicable from January 1 2018. Below we discuss specific
details affecting companies.
IFRS 4: The latest changes include the possibility for
entities providing insurance contracts to be excluded from the
application of IFRS 9. The changes also attempt to address
several concerns about the difficulties that may arise due to
IFRS 9. Entities that choose to proceed with this exclusion are
obliged to provide an explanatory note.
IFRS 2: For share-based payment transactions, in which goods
or services are received as part of a share-based payment
arrangement, the latest changes include some modalities of
financial declarations as regards the methods and tools that
will be used for the cash-settled share-based payments. The aim
is to introduce guidance for the accounting requirements for
cash-settled share-based payments that follows the same
approach as used for equity-settled share-based payments.
IFRS 15: The changes introduce the single, principles-based
five-step model to be applied to all contracts with customers,
regarding revenue recognition, with uniformity for all
transactions and for all companies, without differentiating
between contracts. Based on the use of the five-step model, the
moment of revenue recognition may change. Customer contract
revenues, which were previously recognised throughout the term
of the contract, in future may be recognised only once and as a
whole, at the end of the contract and vice versa. The basic
principle of IFRS 15 is that the revenue will be recognised at
the moment the products and/or services are transferred into
the control of the customer. In order to realise a proper and
efficient implementation of the latest changes, it is necessary
to increase the importance of valuations, so that each product
and/or service part of the contract is recognised at its real
value.
IAS 40: This standard provides the possibility for an entity
to transfer an asset to, or from, a long-term invested
property, but only when there is a change in use. A change in
use occurs when a property meets or ceases to fulfill criteria
making it an investment property, and there is evidence to
support this change in use.
Eurofast advises Albanian companies to examine thoroughly
the impact these new standards will have on their operations,
particularly as regards IFRS 15. We expect that a number of
industries (such as those involved in the supply of contracted
long-term services or the sale of licences) will be affected
and may need to seek tax advice to ensure tax compliance.
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| Dorina Asllani Ndreka |
Dorina Asllani Ndreka (tirana@eurofast.eu)
Eurofast Global
Tel: + 355 (0) 42 248 548
Website: www.eurofast.eu