EBS - Accounting Standards EN

EBS Accounting Standards (NAS/IAS)

National and International Accounting Standards

Entersoft BUSINESS SUITE^® 4.0

Guideline for applying Standards

Accounting standards scope

Both I.A.S (International Accounting Standards) and N.A.S (National Accounting Standards) are a set of rules and guidelines for the proper accounting of significant events and risk forecasting, as well as the justification of economic figures in order to realistically illustrate companies’ economic status.

All these features of the application required to apply the rules that tax laws set for day-to-day operations (general accounting rules, document issuance, transits, transactions etc.) are already available for use in Entersoft Business Suite & Entersoft Expert.

The purpose of this document is to explain how “double books” could be kept for both purposes of tax auditing and correct accounting of economic figures, in case of any regulation application for registering additional entries (impairments, realisable etc.) to support Financial reports and present the realistic status of the company.

These guidelines DO NOT concern cases in which additional entries are tax-based and therefore do not lead to the need to update “double” books (accounting and tax). In such cases, the accounting officer will use the known procedures for registering adjusting entries, additional cost entries or depreciations, and so on which the system provides.

Methodology of bookkeeping for accounting and tax base

Choose basic reporting system

Adjusting entries in accounting base

Entersoft’s proposal is based on the fact that all invoices and costing entries are bookkept in the system in a way that correctly updates the “tax base”. Tax base means the set of Books, Data and Procedures documenting transactions and transits, in accordance with legislation. The company’s tax is based on this system.

If the correct valuation of receivables and payables leads to different result, adjusting entries are registered in the “accounting base” (NAS/IAS) using the appropriate documents for this purpose. These entries:

• Update special “Journal for adjusting entries NAS/IAS” in Accounting and
• Feed (on completion of the other entries of accounting books) the published financial report of the company (and the group, if there are related companies) with a corresponding justification for these differences.

Thus, for instance, if in one system the tax depreciations are X while the corresponding accounting depreciations are Y, then an adjusting entry is registered in the account base X-Y (ie, only the DIFFERENCE). This is achieved in the Entersoft Business Suite either through several procedures (such as Depreciations calculation, Deferred TAX, Stock valuation, Fiscal Year closing etc.) or by primary registration.

With this methodology (of “differential” enties):

1. The two reporting systems coexist and synchronize
2. The completeness of results on the “accounting base” is ensured, since the primary information concerning the “tax base” (documents, entries) update simultaneously AND the “accounting base”.
3. The autonomy of the two parallel reporting systems is ensured
4. Predifined distinct statements are provided for the two systems (Trial Balances, Account Statements, Accounting Journals, Statement of Fiscal Year Closing, detail fixed asset statements, receivable and payable accounts) and comparative statements between them.

Adjusting entries in tax base

If it is desirable to register entries in reverse order, ie all daily entries refer to the “accounting base” and periodically to register adjusting entries in “tax base”, this IS feasible (since the system simply monitors TWO reporting systems), THOUGH:

1. The chosen terminology is “neutral”, though PROVIDES the logic of adjusting entries in “accounting base” to make the functionality of the parallel systems visible.

Therefore, in several entities and forms of the system (document types, default Journals, predefined print-outs and previews, field names) the terminology is likely to confuse users, so customization will be needed to properly rename them.

2. The print-outs and the previews are NOT equivelant to both reporting systems. Those that include “adjusting entries of Accounting Standards” are accessed through the menu Business intelligence/Accounting Standards (IAS/NAS), while all others IGNORE the adjusting entries (including the Periodic VAT Statement etc.).

Hence, since the adjustments will refer to the tax base, it is necessary to check the adequacy of these print-outs for obtaining the required information for tax audit purposes. If deficiencies are identified, those must be covered by additional print-outs.

Special accounts in Chart of accounts or special Accounting Journals

The system bookkeeps ALL accounting data in detail by Accounting Journal (in Databases that are automatically updated for easy retrieval of data to be printed), so it is unnecessary to bookkeep special accounts for those amounts that differentiate the tax base from the IAS.

If it is desirable to bookkeep special accounts, this IS feasible, THOUGH:

1. It will be necessary to customize the accounting documents used for this purpose in order to update these special accounts in Accounting
2. Special Accounting Journals can not be avoided since accounts are NOT designated for exclusive use as adjusting entries from one system to another, while Accounting Journals are designated as such:

Only by using this attribute, the two systems (accounting – tax base) will be autonomous and the comparison between them will be distinctive.

For the entries that are accounted for by the different modules, all that is required is to update them to each special Accounting Journal (which is needed in each case/scenario).

For the entries that are primarily registered in Accounting, it is suggested to develop special rules (business rules) at the system level to check that specific accounts are being used (for instance, place in these accounts a specific special value to a user defined field and check that all accounts of the document in such an Accounting Journal have this attribute).

Method of activation and registration of adjusting entries

In all Entersoft Business Suite modules, adjusting entries are adapted to Accounting Standards with appropriate “document types”. The results of these entries DO NOT affect the “tax base” statements, and are taken into account in specific “accounting base” statements. In order to support adjusting entries registration and to take them into account in automated inventory and other automated procedures, the following actions are required:

Accounting Journals & Accounting document types

The following Accounting Journals and Document types must be defined. Coding is just the suggested. Customization can be implemented according to the needs.

Module document types

Verify thtat the following document types exist or import them from \ESMasterConfig and then check for any serial numbers in these types.

EN Document types	RO Document types
Liabilities and Claims adjustments
ATB	Adjusting entry of trade account balance (NAS/ IAS)	ASC	Ajustare sold partener comercial (NAS/IAS)
ATB-B	Adjusting entry of trade account balance (NAS/ IAS) – Balance Sheet entry	ASC-B	Ajustare sold partener commercial (NAS/IAS) - Bilant
Stock adjustments
CIA	Acquisition Cost Differences (NAS/IAS)	DCA	Diferenta cost de achizitie (NAS/IAS)
CIS	Cost of Inventory (NAS/IAS)	CSN	Cost stoc (NAS/IAS)
CIG	Grants Cost Differences (NAS/IAS)	DIA	Diferente cost alte iesiri (NAS/IAS)
CGD	Stock valuation cost corrections (NAS/IAS)	DIC	Diferente cost iesiri (NAS/IAS)
Adjustments in Cost from Production
VPI	Cost of Production (NAS/IAS)	CPN	Costul productiei (NAS/IAS)
VPP	Cost of Production - Reversal (NAS/IAS)	SCP	Stornare cost productie (NAS/IAS)
CIC	Cost Consumption Differences (NAS/IAS)	CCD	Diferente cost consumuri (NAS/IAS)
Adjustments in Fixed Assets
FRI	Re-evaluation of Fixed asset acquisition cost (NAS/IAS)	RAM	Reevaluare achizitie mijloace fixe (Baza contabila)
FID	Fixed Assets Depreciations (NAS/IAS)	NMF	Amortizare mijloace fixe (NAS/IAS)
FXA	Expense Capitalisation (NAS/IAS)	CCH-I	Capitalizare cheltuieli (NAS/IAS)
FCI	Cancel Depreciation (NAS/IAS)	CNF	Anulare capitalizare cheltuieli (NAS/IAS)
FRD	Re-estimation Of Fixed Assets Depreciations (IAS)	NRM	Reevaluare amortizare mijloace fixe (NAS/IAS)
FTN	Deferred Tax from Negative Differences (IAS)	IMN	Impozit amanat din diferent negative IAS
FTP	Deferred Tax from Positive Differences (IAS)	IMP	Impozit amanat din diferente positive IAS
FWI	Corrective entry -Balance write off (NAS/IAS)	CMF	Casare mijloace fixe (NAS\IAS)
Opening entries for Financial Data
ICP*	Receivables Opening Debit Differences (NAS/IAS)	SID*	Sold initial debitor clienti/debitori (NAS/IAS)
ICD	Receivables Opening Debit Differences (NAS/IAS) (Closing process)	SID-A	Sold initial debitor automat clienti/debitori (NAS\IAS)
ICX*	Receivables Opening Credit Differences (NAS/IAS)	SII*	Sold initial creditor clienti/debitori (NAS\IAS)
ICC	Receivables Opening Credit Differences (NAS/IAS) (Closing process)	SII-A	Sold initial debitor automat clienti/debitori (NAS\IAS)
ISP*	Payables Opening Debit Differences for (NAS/IAS)	SIF*	Sold initial debitor furnizori/creditori (NAS\IAS)
IDD	Payables Opening Debit Differences for (NAS/IAS) (Closing process)	SIF-A	Sold initial debitor automat furnizori/creditori (NAS/IAS)
ISX*	Payables Opening Credit Differences (NAS/IAS)	SIC*	Sold initial creditor furnizori/creditori (NAS/IAS)
IDS	Payables Opening Credit Differences NAS/IAS (Closing process)	SIC-A	Sold initial creditor automat furnizori/creditori (NAS/IAS)
ISA	Acquisition Cost Differences (NAS/IAS) - Opening entry	SCD	Sold initial diferente cost achizitie IAS
FDO*	Fixed asset Informative Acquisition Cost Differences - Opening entry (NAS/IAS)	VAI*	Valoare de achizitie initiala amortizare informativa (NAS/IAS)
FDO1	Fixed asset Informative Acquisition Cost Differences - Opening entry (Closing process) (NAS/IAS)	VAI-A	Valoare de achizitie initiala amortizare informative - automat (NAS\IAS)
FIO*	Fixed Asset Opening Informative Depreciation Entry (NAS/IAS)	AII*	Amortizare informativA initiala (NAS/IAS)
FIO1	Fixed Asset opening informative depreciation entry (Nas/IAS) (Closing process)	AII-A	Amortizare informativa automata initiala (NAS/IAS)

In the document types of the first 4 categories (trade accounts, inventory, production, fixed assets) the appropriate Accounting Journal (adjusting entries of Accounting Standards) should be declared in order to properly account them.

Opening entries of accounting standards from previous system

As far as it concerns the Opening documents of the 5^th category above, the * marked for the initial inventory from third system , IF it was monitored (internal or off-book) of the parallel reporting system. In such a case, you must do the following:

• Trial Balances of tax and accounting base from previous system in excel
• Create differences between the two reporting systems (with formulas)
• Import from excel to the appropriate Opening documents “NAS/IAS differences” depending on the Trial Balance type
• Insert Opening accounting document in the appropriate Accounting Journal with the entries of differences
• Compliance of Trial Balances of the modules and Accounting Trial Balance with the previous system (tax base, accounting base)

Fixed asset depreciation rules & calculation procedures

1. Customize the depreciation rules concerning Accounting Standards, if accounting depreciations differ from tax. A convenient way of setting depreciation rules is based on “Life cycle”:

2. Set depreciation rule in fixed assets:

3. Check and possible change of start date of accounting depreciations of fixed assets (which the system initially identifies with the start date of tax depreciations).

The automated procedures for calculation of fixed assets adjusting entries on accounting base are:

• Calculate depreciations (by activating the “Book/IAS depreciations”)
• Revaluation (NAS/IAS) by a selected percentage %
• Calculate Deferred Tax (based on a. the income tax rate and b. the difference between the accounting and tax acquisition cost or fixed assets depreciations). For correct accounting of documents produced by this procedure (either in the Income Statement or in the Capital Revaluations, based on the “origin” of the difference), the following accounting groups should be defined:
  • ES.4.IS.0001 - IAS - Income tax account
  • ES.4.IS.0002 - IAS - Income tax account – Liabilities
  • ES.4.IS.0003 - IAS - Capital account (Revaluation reserve)
  • ES.4.IS.0004 - IAS - Income tax account (Fiscal year's results)

Customization of Fiscal Year Closing

If the account closing procedure is followed by Accounting, through the Closing Phase A, create the appropriate template documents by activating the option “NAS/IAS Accounting Journals” to close the related accounts AND on the accounting base.

Check values of generic parameters

Check the company parameter values in the category “International and National Accounting Standards (IAS/NAS)”:

Parameter	Default value - EN	Default value - RO
Stock Valuation - Calculation activation of accounting standards differences	NO	NO
Stock Valuation - Document Type for Grants Cost changes (NAS/IAS)	CIG	DIA
Stock Valuation - Document Type for Production Cost differences reversal entries (NAS/IAS)	VPP	SCP
Stock Valuation - Document Type for Final Production Cost differences (NAS/IAS)	VPI	CPN
Stock Valuation - Document Type for Production Cost differences (NAS/IAS)	VPI	CPN
Stock Valuation - Document Type for Consumption Cost changes (NAS/IAS)		CCD
Journals - Journal for adjustment entries NAS/IAS		NC-I
Journals - Forecast adjustment Journal NAS/IAS		NC-I
Fiscal year closing - Document Type for Stock Cost differences (NAS/IAS)	ISA	SCD
Fiscal year closing - Document Type for Inventory of Fixed Asset Acquisition cost differences (NAS/IAS)	FDO1	VAI-A
Fiscal year closing - Document Type for Inventory of Fixed Asset depreciation differences (NAS/IAS)	FIO1	AII-A
Fiscal year closing - Document Type for Inventory of Customers/Debtors Credit differences (NAS/IAS)	ICC	SII-A
Fiscal year closing - Document Type for Inventory of Suppliers/Creditors Credit differences (NAS/IAS)	IDS	SIC-A
Fiscal year closing - Document Type for Inventory of Customers/Debtors Debit differences (NAS/IAS)	ICP	SID-A
Fiscal year closing - Document Type for Inventory of Suppliers/Creditors Credit differences (NAS/IAS)	IDD	SIF-A
Fiscal year closing - Document Type for General Ledger Inventory (NAS/IAS)		IRD-I
Fiscal year closing - Document Type for Informative Accounting Inventory (NAS/IAS)
Fixed assets - Coefficients in depreciation rules (NAS/IAS)	Absolute Definition
Fixed assets - Document Type for the revaluation of acquisition cost (NAS/IAS)	FRI	RAM
Fixed assets - Document Type for the revaluation of depreciations (NAS/IAS)	FRD	NRM
Fixed assets - Document Type for the Diminished Depreciations (NAS/IAS)	FTP	IMP
Fixed assets - Document Type for depreciations (NAS/IAS)	FID	NMF
Fixed assets - Document Type for depreciations (Reversal) (NAS/IAS)	FCI	CNF
Production - Filler profile for the Credit of the Direct Production Cost (NAS/IAS)	PROD-C94D93-DIRCOST-IAS
Production - Filler profile for the Credit of the Indirect Production Cost (NAS/IAS)	PROD-C92D93-INDCOST-IAS
Production - Filler profile for the Debit of the Direct Production Cost (NAS/IAS)	PROD-D93C94-DIRCOST-IAS
Production - Filler profile for the Debit of the Indirect Production Cost (NAS/IAS)	PROD-D93C92-INDCOST-IAS
Production - Accounting Document Type for the Production Cost Accounting (NAS/IAS)	-	ICD-I

Special reports of Accounting Standards

Access all statements that incorporate the adjusting entries in the Accounting Standards of all modules and the corresponding comparative statements of Tax-Accounting Base through the menu Business intelligence/Accounting Standards (IAS/NAS):

• Accounting. Trail Balances and Accounting Statements, Group Trial Balances (full or derecognized intercompany transactions), Fiscal Year Closing Books, Tax-Accounting Base Comparative Table.

Actually, the shown differences are exactly the same entries (contents) of the special “Accounting Standatds Journal Differences”.

• Fixed Assets. Registry, Tax-Accounting Base Comparison, IAS deferred tax report, Depreciation Analysis (comparative by Account and Fixed Asset).
• Customers and Suppliers. Trial Balance, Registers and Tax-Accounting Base Comparison.

Usually, differences arise from possible unreliable demand entries.

• Expenses. Trial Balance, Registers and Tax-Accounting Base Comparison.

The differences arise from possible capitalization of expenses that are not tax-exempt.

• Inventory. Trial Balance, Registers, Production cost overview, Tax-Accounting Base Comparison.

The differencies arise mainly from possible diversification of Production Cost (and therefore of Cost of Goods Sold and Stock) due to differences between tax-accounting fixed asset depreciations (which affect Indirect costs of products).

• Justification of Financial Statements with the detailed information from the Trial Balances of the various subsystems and with ready presets:

Receivables from Customers Payables to Suppliers	Show the debit customer balances (part of asset) and, respectively, credit balances of suppliers (part of liabilities) by accounting category. Including possible adjustments because of accounting standards.
Customer Advances Advances to Suppliers	Displays credit customer balances (part of liabilities) and the debit balances of suppliers (part of Assets) by accounting category. If, for example, you have separate categories for goods suppliers and assets, then the amount 'prepayments for Fixed Assets’-exported from here directly.
Receivables from Notes Receivable Payables from Notes Payable	Showing the balances receivables and payables from notes, either from customers or from suppliers, by accounting category of trade account. Respective information can be obtained by appropriately accounts grouping, with the difference that this statement gives a detailed explanation of the origin of assets and liabilities. You can use the standard "choice" to isolate the debit of balances. The same information is displayed in columns of notes "Trial balance commercial balance analysis”.
Revenue & cost of sales	Based on Sales and Inventory modules. Displays Sales Value, Cost and Gross Profit by accounting category. The cost information from the valuation process, which must be preceded. If you include and Services, then, their cost comes from the corresponding field of documents lines. It provides criteria item accounting categories and trade accounts (for example, isolation of sales abroad) and grouping capabilities by dimension. If there are manufactured products, the cost of sales includes the adjustments made (on the basis of accounting) from the Cost Estimating process.
	Respective information is taken from the accounting sub ledger, after posting the cost of sales, with the difference that this statement gives a detailed justification of the revenue source.
Profit – Loss on Fixed Assets Disposal	Displays the sales value of fixed assets by accounting category and the acquisition cost was not depreciated at the time of sale (as that is the sale of assets accounted to inform extraordinary gains / losses). Respective information obtained from appropriate options in Accounting Trial Balances, with the difference that this statement enables full justification for the information provided (e.g. if you add to the grouping and the fixed or if you develop the second level in the records).
Expenses per Type	Displays the transactions of expenses accounts with grouping by account type (EXPENSE TYPE) and account (up to 2nd level). You can format the printing another way, using the criteria “for advanced users”. The accounts should be properly been updated regarding the “type”, because at this point only the accounts related with expenses from general chart of accounts taken into consideration.
Expenses by Cost Center	Displays expenses transactions grouped by cost center (FUNCTION) and account (up to 2nd level). In order to have readymade presets to help the unproblematic reception of the results, without continuous adjustments of the criteria, two new company parameters have been added to indicate how you would like to track the allocation of costs to operations. The parameters are taken into account in the proposed parameter values: The available options, concerning the chart of accounts for the allocation of costs and their allocation methodology to accounts or accounts analysis to level dimensions (Analytical Accounting, Cost Accounting, Analytical Accounting per dimension, General Ledger per dimension), as and the horizontal dimension represents the "function", into the analysis required for the export results by operation (Business unit, Activity, Dimension 1, Dimension 2 Business Unit Category, Activity Category, Dimension Category 1, Dimension Category 2). Depending on these choices, suggested the chart of accounts, the type of accounts to be included and the dimension in which to group. One can change the suggested parameter values as in all financial statements.
Interest Income & Interest Expense	Displays balances from account types "Debit Interest" and "Capital Income" so presupposes that has informed the account type correctly. It helps to isolate amounts required to update the Income Statement (Income from participations and investments and credit / debit interest for configuring EBT). If you want to use it for other groupings of income and expenses, change the default values of Account Types from the criteria "For Advanced Users.