The Law of Ukraine "On Accounting and Financial Reporting in Ukraine" defines Accounting Policy as “a set of principles, methods and procedures used by an enterprise for accounting and preparation and submission of its financial statements”.  Approval of an accounting policy is mandatory for every enterprise in Ukraine.

The practice of tax audits by the Ukrainian State Tax Service and litigations on tax issues demonstrate that accounting policies are widely used by tax authorities to substantiate additional tax charges and penalties, while being used by taxpayers as a means of confirming the correctness of their accounting approaches, as in accordance with Articles 20.1.6, 20.1.44 and 44.1 of the Tax Code of Ukraine (TCU):

  • Supervisory authorities are entitled to verify the correctness and completeness of the determination of the financial result before tax in the accounting records prepared in accordance with Ukrainian GAAP or IFRS; examining the source documents used in accounting, registers, and financial and other reports.
  • Taxpayers are obliged to keep records of income, expenses, and other indicators, basing their tax reporting on source documents, accounting registers, and other relevant documents. Deriving tax reporting indicators and preparing customs declarations based on data not supported by documents is prohibited.

If a company’s accounting policy is of improper quality or is drafted informally, this may result in tax risks related to the fiscal interpretation of Ukrainian GAAP or IFRS by the Ukrainian tax authorities. However, a qualitative and thorough accounting policy is usually an effective means of substantiating the legitimacy of the accounting approaches used by taxpayers.

KPMG in Ukraine’s tax advisory team has established experience in providing high-quality and timely services for drafting (or updating) accounting policies, bringing together specialists with complete holistic knowledge of accounting and taxation for companies operating in various industries.

When do you need expert assistance in drafting a new accounting policy or enhancing an existing one?

  • during an audit by the Ukrainian tax authorities (company accounting policies are typically requested by the State Tax Service among the first documents to be reviewed)
  • when your company is a large taxpayer, and is obliged to prepare and submit information in the SAF-T UA format; including accounting policies under IFRS or Ukrainian GAAP. This must be disclosed at the request of the Ukrainian State Tax Service (as required by art. 85.2 of the TCU, large payers are obliged to provide such information in the SAF-T UA format during an audit no later than 2 business days following the day of receipt of the request)
  • when transitioning from Ukrainian GAAP to IFRS (voluntarily or in accordance with legal requirements)
  • if your accounting policy has not been updated for a significant period of time following changes to the TCU, IFRS, or Ukrainian GAAP, changes in the company's operations, or in response to changes in the economic environment (i.e. due to martial law in Ukraine)
  • when performing specific or non-standard business processes that are not explicitly regulated in Ukrainian GAAP or IAS/IFRS
  • if your company's software (SAP/ERP, etc.) is not adapted to Ukrainian legislative requirements (in terms of documenting transactions, applying "standard prices" in accounting for inventory, accrual/reversal of provisions, etc.)

What risks do companies face?

In case of lack of "formal" preparation of an accounting policy, the Ukrainian tax authorities may impose additional taxes and penalties related to determining that a taxpayer's accounting methods are unlawful in the following ways:

  • write-off of doubtful and bad receivables (including establishing and using provisions for doubtful debts), as well as recognition of income primarily from the provision of services (completeness of recognition, observance of reporting tax periods)
  • establishment, use, or adjustment of provisions and allowances (specifically, the correctness of tax adjustments when declaring corporate income tax)
  • improper documenting of business transactions (specifically due to using accounting certificates and "arbitrary" forms of source documents if such an option is not formalised in the company’s accounting policy)
  • discounting or measurement of financial investments, instruments/liabilities, investment property (at fair value or discounted value, using the equity method, etc.)
  • expending the cost of inventories, low-value items, etc. in a period without proper recording or documentation of the use of such assets
  • sales of goods, use of production and other inventories applying "standard prices", as well as recognising differences (between actual and "standard" prices) in the company’s Statement of Operations or as a component of the value of inventory balances as at reporting dates
  • cost of goods, works, and services sold (in case of departure from the applicable methodological recommendations approved by Ukrainian state authorities regulating the costs calculation, classification, etc.)

Our services

After documenting your existing accounting procedures and documentation of key business processes and material business transactions (primarily those for which IFRS or Ukrainian GAAP provide accounting variations or exemptions), as well as analysing current legal requirements for accounting, tax reporting and documentation, the team of KPMG in Ukraine will prepare and deliver to you:

  • recommendations on the proper formalisation of accounting approaches in your company’s accounting policy (if the company chooses to update its accounting policy itself)
  • a draft accounting policy according to IFRS or Ukrainian GAAP (if the company orders the preparation/update of its accounting policy by KPMG specialists).

Such recommendations or draft accounting policy will:

  • properly formalise accounting and financial reporting procedures, taking into account tax and management aspects important to your specific company
  • reflect your company's approaches to accounting for business transactions for which there is a choice in accordance with IFRS or Ukrainian GAAP, as well as take into account the specifics of accounting programme operation
  • help minimise (within the current legal framework) any tax risks that may arise in connection with business transactions that are typical for the company and their relevant documentation

Why choose KPMG in Ukraine?

A team of specialists

KPMG specialists have in-depth knowledge of accounting and taxation, understanding the specifics of business for enterprises operating in different industries in Ukraine. 

Necessary experience

Over the past 5 years, the KPMG team in Ukraine has prepared or updated more than 150 accounting policies for companies from various industries, both under Ukrainian GAAP and IFRS.

KPMG in Ukraine tax specialist also have significant experience in terms of tax support for companies transitioning to IFRS. 

“The capacity to see things through the eyes of the Ukrainian tax authorities and auditors”

When preparing accounting policies, we analyse each situation from the perspective of the Ukrainian tax authorities and auditors, and then formalise accounting approaches that strengthen your company's tax position and simplify subsequent audits of its financial statements.

Prompt provision of deliverables

Accounting policy recommendations or drafting of such policy will be prepared and provided to the client within a short timeframe.

Guarantees and future co-operation

Based on a separate agreement, we can support your company with any future changes to your formalised accounting policy or during subsequent Ukrainian State Tax Service audits and investigations of financial statements.