New Law on Accounting, Reporting and Auditing

Georgian law in relation to Accounting, Reporting and Auditing has established new rules. Managing Partner of 'ALTIDO LLC' Mr. Giorgi Kavelashvili has answered some questions on the topic: 

What exactly is the Georgian law on accounting, reporting and auditing”? 

The law of Georgia about accounting, reporting and auditing from one hand defines accounting and financial reporting rules for companies incorporating with Georgia, and on the other hand, defines legal background, liabilities and quality control mechanisms for Audit Companies. 

More specifically, what does a new law state and what has changed from companies? 

According to the new law, companies are divided into 4 groups/categories according to the size of their Assets, Revenues and Number of Employees. Each group has its corresponding liabilities of business accounting and financial reporting. For example, the 1st category includes companies whose assets are worth more than 50 million GEL, revenues more than 100 million or more than 250 employees (at least two criterias of the mentioned three must be met). The second category unites companies whose assets are less than GEL 50 million, revenues less than GEL 100 million and number of employees less than 250. The 3rd group comprises of companies whose assets are worth less than 10 million GEL, revenues less than 20 million GEL and number of employees less than 50 persons. 4th category unites the smallest companies, whose assets are less than 1 million GEL, revenues less than 2 million GEL and number of employees less than 10 persons. In order to obtain the exact category for a company, at least 2 criterias from the abovementioned three must be met. 

The largest companies defined by the law (1st category) must run accounting and financial reporting according to the International Financial Reporting Standards (IFRS). Companies who are in 2nd and 3rd categories must meet criterias of International Financial Reporting Standards for SME (IFRS for SME). In addition, each year 1st and 2nd category companies have to carry out a Financial Audit and prepare a Management Report of the previous year. All category companies, despite their size and number of employees, must prepare a financial annual Financial Reporting and report it to the Service for Accounting, Reporting and Auditing Supervision. Generally speaking, all companies have to be aware of the new law requirements and start preparational activities now in order to comply with the legislation. 

What will the new rules bring to enterprises? Will it not be an additional burden to businesses? 

First of all, I’d like to highlight that execution of new rules will be beneficial for the businesses/companies itself. It is not an additional burden at all. Implementing internationally accepted principles and standards of accounting and financial reporting will guarantee top management of companies, as well as proper and adequate information about their businesses and that decisions are made on such information. In Georgia you can meet any number of companies (of which there are some quite large ones) who do not run accounting and financial reporting according to standards and, not surprisingly, top management doesn’t have proper financial information about their businesses. In such cases, managerial decisions are made subjectively and in many cases, are harmful for businesses. Unfortunately, some business managers think that hiring qualified accountant(s) or, purchase of good accounting software is just a waste of money. In fact, as I’ve already mentioned above, wrong business decisions are made due to the absence of them. Company managers have to acknowledge that all the changes in the mentioned regulations are firstly in favor of their businesses and ease their daily activities. 

What does ALTIDO LLC offer to its customers? 

Altido LLC is a team of professionals in the field of Audit, Accounting and Financial Services, with the expertise in the international accounting standard and tax. Our team has outstanding experience in accounting, financial reporting, audit and tax issues. We successfully provide our services to many legal entities and individuals. We have an individual approach to our clients despite their size and never leave them without proper attention. 

Coming back to the question, we offer our clients Audit and Financial Reporting according to international standards, full outsourcing of accounting services, tax structuring and tax advice. It is very important that when we provide accounting to our clients it doesn’t only mean assessing transactions in accounting software, but create a system and procedures of operative accounting of daily processes taking into account specification of businesses of our clients (such as: daily cash movement control procedures, stock control, inventory check rule etc.). 

I really hope that companies’ top managers will not treat new accounting and financial reporting requirements as an addition burden to businesses, but will acknowledge that improvement of financial reporting and compliance with the legislation is a step forward for their success.