Reporting under IFRS's in Cyprus - Consolidations STELIOS A. GREGORIOU Tallinn 16 July 2009
CYPRUS COMPANY LAW SECTION 142 <ul><li>(1) (a) All Cyprus companies have obligation to prepare financial statements (F/S) ...
CYPRUS COMPANY LAW SECTION 142 <ul><li>(1) (b) Companies with subsidiaries have obligation to prepare consolidated F/S as ...
. <ul><li>P1 (Parent in Cyprus) </li></ul><ul><li>SUB 1  SUB 2 </li></ul><ul><li>CY  Russia </li></ul><ul><li>SUB 3 </li><...
Important! <ul><li>Combined F/S and/or Pro-forma F/S are NOT </li></ul><ul><li>the statutory consolidated IFRS F/S! </li><...
CONSOLIDATED F/S UNDER IFRS   <ul><li>IAS 27 Para 9 </li></ul><ul><li>A parent, other than a parent described in </li></ul...
CONSOLIDATED F/S UNDER IFRS <ul><li>IAS 27 Para 10 </li></ul><ul><li>A parent  need not  present consolidated F/S </li></u...
CONSOLIDATED F/S UNDER IFRS <ul><li>(b) the parent’s debt or equity instruments are not traded in a public market… </li></...
CONSOLIDATED F/S UNDER IFRS <ul><li>(d) the ultimate parent or any intermediary parent of the parent produces consolidated...
Problem 1 <ul><li>P1 (Parent in Cyprus) </li></ul><ul><li>SUB 1  SUB 2 </li></ul><ul><li>CY  Russia </li></ul><ul><li>(No ...
Problem 2 <ul><li>P2 USA  or  P2 RUSSIA </li></ul><ul><li>(US GAAP)  (Russian GAAP) </li></ul><ul><li>P1 (Parent in Cyprus...
Case1-Exemption for CY Parent under IAS 27 <ul><li>P2 USA or P2 RUSSIA </li></ul><ul><li>(Produce IFRS cons. F/S available...
Case 2-Exemption for CY Parent under IAS 27 <ul><li>P3 UK (Ultimate parent) </li></ul><ul><li>(Produces IFRS cons. F/S ava...
CONSEQUENCES <ul><li>Additional cost of preparing cons. F/S, or </li></ul><ul><li>If no preparation, qualification in Audi...
Possible solution for Problem 1 and 2 <ul><li>Cyprus Company Law Section 142 </li></ul><ul><li>(1) (d)  Small sized groups...
CYPRUS COMPANY LAW SECTION 142 <ul><li>(1) (e) A small sized group is a group of </li></ul><ul><li>companies, of which the...
CYPRUS COMPANY LAW SECTION 142 <ul><li>(iii) together they fulfill two out of the following three criteria at the date of ...
CYPRUS COMPANY LAW SECTION 142 <ul><li>2. The net turnover does not exceed EURO29.2m, and </li></ul><ul><li>3. The average...
Additional problem 3 <ul><li>P2 USA  or  P2 RUSSIA </li></ul><ul><li>(US GAAP)  (Russian GAAP) </li></ul><ul><li>P1 (Paren...
CYPRUS COMPANY LAW SECTION 142 <ul><li>(1) (f) Groups of companies of which the </li></ul><ul><li>ultimate parent company ...
Audit issues <ul><li>Baker Tilly Klitou </li></ul><ul><li>(Principal auditor) </li></ul><ul><li>Cyprus Parent </li></ul><u...
Audit issues <ul><li>The Russian subsidiaries MUST prepare IFRS reporting packages (if IFRS F/S are not available) </li></...
ISA 600 “Using the work of another auditor” <ul><li>The principal auditor reviews a written summary of the other auditor’s...
Revised EU 8 th  Directive-Group Audits <ul><li>Article 27 sets new rules for statutory audits of Group F/S </li></ul><ul>...
Thank you! <ul><li>Stelios A. Gregoriou  </li></ul><ul><li>+357 2559 1515 </li></ul><ul><li>[email_address] </li></ul>
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Stelios Gregoriou - IBCPIB™ 2009

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Reporting under IFRS's in Cyprus - Consolidations

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Transcript of "Stelios Gregoriou - IBCPIB™ 2009"

  1. 1. Reporting under IFRS's in Cyprus - Consolidations STELIOS A. GREGORIOU Tallinn 16 July 2009
  2. 2. CYPRUS COMPANY LAW SECTION 142 <ul><li>(1) (a) All Cyprus companies have obligation to prepare financial statements (F/S) using IFRS. </li></ul><ul><li>The above F/S must be subject to a statutory </li></ul><ul><li>audit by an auditor licensed to practice in </li></ul><ul><li>Cyprus and submitted to the Registrar of </li></ul><ul><li>Companies and the Tax Office . </li></ul>
  3. 3. CYPRUS COMPANY LAW SECTION 142 <ul><li>(1) (b) Companies with subsidiaries have obligation to prepare consolidated F/S as per IFRS provisions. </li></ul><ul><li>These are the “statutory consolidated F/S” </li></ul>
  4. 4. . <ul><li>P1 (Parent in Cyprus) </li></ul><ul><li>SUB 1 SUB 2 </li></ul><ul><li>CY Russia </li></ul><ul><li>SUB 3 </li></ul><ul><li>Russia </li></ul>
  5. 5. Important! <ul><li>Combined F/S and/or Pro-forma F/S are NOT </li></ul><ul><li>the statutory consolidated IFRS F/S! </li></ul><ul><li>Such Combined and Pro-forma F/S are </li></ul><ul><li>prepared as per management’s request and </li></ul><ul><li>may be prepared under any basis other than </li></ul><ul><li>IFRS! </li></ul>
  6. 6. CONSOLIDATED F/S UNDER IFRS <ul><li>IAS 27 Para 9 </li></ul><ul><li>A parent, other than a parent described in </li></ul><ul><li>Paragraph 10, shall present consolidated F/S in </li></ul><ul><li>which it consolidates its investments in </li></ul><ul><li>Subsidiaries in accordance with IAS 27. </li></ul>
  7. 7. CONSOLIDATED F/S UNDER IFRS <ul><li>IAS 27 Para 10 </li></ul><ul><li>A parent need not present consolidated F/S </li></ul><ul><li>only if: </li></ul><ul><li>(a) the parent is itself a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and its other owners…..do not object to the parent not presenting consolidated F/S. </li></ul>
  8. 8. CONSOLIDATED F/S UNDER IFRS <ul><li>(b) the parent’s debt or equity instruments are not traded in a public market… </li></ul><ul><li>(c) the parent did not file, nor is it in the process of filing, its F/S with a securities commission …..for the purpose of issuing any class of its instruments in a public market, and </li></ul>
  9. 9. CONSOLIDATED F/S UNDER IFRS <ul><li>(d) the ultimate parent or any intermediary parent of the parent produces consolidated F/S , available for public use that comply with IFRS’s. </li></ul>
  10. 10. Problem 1 <ul><li>P1 (Parent in Cyprus) </li></ul><ul><li>SUB 1 SUB 2 </li></ul><ul><li>CY Russia </li></ul><ul><li>(No exemption under IFRS for Cyprus Parent) </li></ul>
  11. 11. Problem 2 <ul><li>P2 USA or P2 RUSSIA </li></ul><ul><li>(US GAAP) (Russian GAAP) </li></ul><ul><li>P1 (Parent in Cyprus) </li></ul><ul><li>SUB 1 SUB 2 </li></ul><ul><li>CY Russia </li></ul><ul><li>(No exemption under IFRS for Cyprus Parent) </li></ul>
  12. 12. Case1-Exemption for CY Parent under IAS 27 <ul><li>P2 USA or P2 RUSSIA </li></ul><ul><li>(Produce IFRS cons. F/S available for public use) </li></ul><ul><li>100% or 80% MI </li></ul><ul><li>20% </li></ul><ul><li>P1 (Parent in Cyprus) </li></ul><ul><li>SUB 1 SUB 2 </li></ul><ul><li>CY Russia </li></ul>
  13. 13. Case 2-Exemption for CY Parent under IAS 27 <ul><li>P3 UK (Ultimate parent) </li></ul><ul><li>(Produces IFRS cons. F/S available for public use) </li></ul><ul><li>P2 Russia (Intermediate parent) </li></ul><ul><li>100% or 80% MI </li></ul><ul><li>20% </li></ul><ul><li>P1 (Parent in Cyprus) </li></ul><ul><li>SUB 1 SUB 2 </li></ul><ul><li>CY Russia </li></ul>
  14. 14. CONSEQUENCES <ul><li>Additional cost of preparing cons. F/S, or </li></ul><ul><li>If no preparation, qualification in Audit Report. </li></ul><ul><li>Cyprus is not as attractive to investors as other jurisdictions that do not have such requirement! </li></ul>
  15. 15. Possible solution for Problem 1 and 2 <ul><li>Cyprus Company Law Section 142 </li></ul><ul><li>(1) (d) Small sized groups are exempt from the requirement to prepare consolidated F/S. </li></ul>
  16. 16. CYPRUS COMPANY LAW SECTION 142 <ul><li>(1) (e) A small sized group is a group of </li></ul><ul><li>companies, of which the companies that are </li></ul><ul><li>being consolidated: </li></ul><ul><li>Are non public companies, </li></ul><ul><li>The preparation of their consolidated F/S is not subject to other legislation, and </li></ul>
  17. 17. CYPRUS COMPANY LAW SECTION 142 <ul><li>(iii) together they fulfill two out of the following three criteria at the date of closure of the Balance Sheet (B/S) of the Parent company: </li></ul><ul><li>The total assets on the B/S (without deducting liabilities) does not exceed EURO14.6m </li></ul>
  18. 18. CYPRUS COMPANY LAW SECTION 142 <ul><li>2. The net turnover does not exceed EURO29.2m, and </li></ul><ul><li>3. The average number of employees during the financial year does not exceed 250 </li></ul>
  19. 19. Additional problem 3 <ul><li>P2 USA or P2 RUSSIA </li></ul><ul><li>(US GAAP) (Russian GAAP) </li></ul><ul><li>P1 (Parent in Cyprus) </li></ul><ul><li>SUB 1 SUB 2 </li></ul><ul><li>CY Russia </li></ul><ul><li>(No exemption under IFRS for Cyprus Parent AND </li></ul><ul><li>Company Law exemption does NOT apply!) </li></ul>
  20. 20. CYPRUS COMPANY LAW SECTION 142 <ul><li>(1) (f) Groups of companies of which the </li></ul><ul><li>ultimate parent company publish consolidated </li></ul><ul><li>F/S according to Generally Accepted </li></ul><ul><li>Accounting Principles (GAAP) are exempt from </li></ul><ul><li>the requirement to prepare consolidated F/S. </li></ul>
  21. 21. Audit issues <ul><li>Baker Tilly Klitou </li></ul><ul><li>(Principal auditor) </li></ul><ul><li>Cyprus Parent </li></ul><ul><li>Baker Tilly Russia </li></ul><ul><li>(Secondary auditors) </li></ul><ul><li>Sub 1 Sub 2 </li></ul><ul><li>(RUSSIA) (RUSSIA) </li></ul>
  22. 22. Audit issues <ul><li>The Russian subsidiaries MUST prepare IFRS reporting packages (if IFRS F/S are not available) </li></ul><ul><li>Secondary auditors MUST issue an audit report on these IFRS reporting packages </li></ul>
  23. 23. ISA 600 “Using the work of another auditor” <ul><li>The principal auditor reviews a written summary of the other auditor’s procedures (e.g. questionnaire etc) </li></ul><ul><li>May perform own tests if considered necessary. </li></ul>
  24. 24. Revised EU 8 th Directive-Group Audits <ul><li>Article 27 sets new rules for statutory audits of Group F/S </li></ul><ul><li>Principal auditor takes FULL responsibility for audit report of Group F/S </li></ul><ul><li>Where part of the Group is outside the EU (e.g Russia, Ukraine etc), the Principal auditor MUST retain copies of the secondary auditors’ working papers OR have a formal agreement with the secondary auditor to allow for UNRESTRICTED access to the working papers in the future. </li></ul>
  25. 25. Thank you! <ul><li>Stelios A. Gregoriou </li></ul><ul><li>+357 2559 1515 </li></ul><ul><li>[email_address] </li></ul>

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