Release date: 28.10.2008
The Law of the Azerbaijan Republic
Chapter I. General provisions
Article 1. Scope
This law establishes the state regulatory procedure for accounting in the Azerbaijan Republic including general principles of accounting organisation and maintaining the rights, objectives and liabilities of enterprises, entities and other entrepreneur subjects in this area, procedure on publication of accounting (financial) statements, guarantee of accuracy of accounting information.
Article 2. Legislation of accounting and reporting
This law and other legislative acts of the Azerbaijan Republic shall regulate relations on accounting and reporting. Should rules of accounting stipulated by the legislation of the Azerbaijan Republic differ from rules established by the International treaties that the Azerbaijan Republic had entered, rules established by the International treaties shall have a prevailing force.
Article 3. Main accounting terminology
The accounting reflects the system of accumulation and regulation of property, capital, turn-over assets and all documented economic operations interrelated in accounting registries as well as general financial and economic, activities of enterprises, entities, organisations and other entrepreneur subjects based on natural numbers and in monetary equivalent made continuously by application of «double recording» method.
Following terminology is applied in this law:
- Economic operations. Facts that reflect separately the property, capital, liabilities, their movement, financial results and general financial and economic activities in enterprises, entities, organisations and other entrepreneur subjects.
- Primary documentation. The written confirmation of economic operations and sanctions of the manager (owner) for implementation.
- Accounting registries. Systemisation of economic activities based on primary accounting documentation.
- Inventory. Checking, evaluating and documenting of actual property, liabilities, payments, tangible and other assets.
- Accounting account. Main unit for grouping and maintaining of information on economic activities and other accounting information. Synthetic balance in accounting used for grouping of public data based on characters established to determine forms of property, capital, financial results, etc. the analytic balance within synthetic balance groups in more details information on personnel, material and other balances. Sub-balance is a part of synthetic balance reflecting grouped analytic data.
- Plan of accounting balances. Combination of synthetic balances and sub-balances based on certain characteristics of accounting.
- Accounting standards. The regulatory document verified to enforce the articles oft his Law, which establishes mandatory rules or regulations of accounting.
- Standard (normal) operation period. The term from the moment of obtain of raw materials, supplies, goods and other valuables, investment of capital to the moment of transforming the results into manufactured products (rendered services, implemented works) and their sale.
- Turnover assets. Monetary means and other assets which are to be used in production, turn-over and consumer areas for the period of one year or within normal operation period (if this period does not exceed 1 year). These shall include monetary means in cash and bank accounts, fast selling securities, debts, commodity stocks, raw materials, incomplete construction, manufactured products, current costs of future operation periods.
- Long-term assets. Useful properties planned to be applied for a period of few years. These shall include fixed assets, capital and other financial investments, intangible assets.
- Intangible assets. Long-term assets of not material base, which however represent certain value formed by rights and privileges the owner holds.
- Property of enterprise. Combination of turnover and long-term assets of the enterprise.
- Current liabilities: loans to be repaid within a period of one year or within a standard (normal) operation period (such period shall not exceed one year), securities, bills of exchange and other liabilities.
- Long-term liabilities. Liabilities to be addresses within a period of more than one year.
- Financial investments. Investments of enterprises, entities, organisations and the entrepreneur subjects in connection with purchase of stocks, bonds and other securities, investments of equity capital of enterprises, provision of loans etc.
- Initial value. Actual expenditures incurred in connection with purchase of property, facility, including the purchase, installation and other similar costs.
- Reinstated value. Evaluation of possible costs for use of long-term assets, which currently are mandatory.
- Financial (accounting) statement. Combination of final results; actual and approved results on property, financial status, results of economic activity etc. of enterprises, entities, organisations and other entrepreneur subjects that can be reflected in forms established for users (stockholders, creditors, owners, state bodies etc.).
- Accounting balance. The form of financial reporting that reflects the property and financial status of enterprise, entity, organisation and other entrepreneurial subject as for the last day of reporting period.
Article 4. Binding force of accounting
All entrepreneur subjects (all enterprises, entities, organisations etc. hereinafter to be referred to as enterprises in this Law), involved in the entrepreneur and other activities on the territory of the Azerbaijan Republic with or without the purposes of making the profit, recognised or not recognised as legal persons involved in activities regardless of their subordination and ownership shall maintain their accounting in accordance with this Law.
Article 5. Subjects of accounting
1. Following shall be deemed as subjects of accounting:
- Used or unused property in monetary or material equivalent (including property leased, granted, given at no cost and other valuables).
- Production reserves and costs, final product;
- Intangible assets;
- Monetary means, securities, payments made to or received from natural or legal, investments;
- Incomes and expenditures on types and periods, profits and losses, use (distribution, accumulation) of profit, compensation of losses;
- Wear out (amortisation) of fixed assets, low value property, intangible assets;
- Liabilities on credits and other debts, financial loans and their use;
- Establishment, use of reserves and other funds of the enterprise, including equity capital as well as other subjects in accordance with accounting plans.
2. In accordance with plan of accounting balance, subjects of accounting stipulated in paragraph one of this Article shall be necessarily reflected on synthetic, analytic balances and sub-balances as well as accounting registries that are interrelated by application of «double recording» method. The procedure for analytic accounting (including the accounting of personnel, materials and other analytic balances) shall be established depending on control and management requirements.
Article 6. Main principles of accounting
Main principles of accounting are the following:
- Continuity of accounting. Continuity of accounting for the entire period of enterprise operation from the date of its establishment through to the date of its liquidation. Application of special accounting procedures during the enterprise liquidation;
- Application of accounting accounts. The accurate reflection on accounting accounts of all, without exceptions, operations, incomes and costs, profits, losses and other similar indicators of property movement as well as liabilities of enterprise, including the time of establishment, by application of «double recording» method;
- Guarantee of the significant advantage of economic content of operations over other indications . Provision of significant advantage of economic content of operations, which are indicated on initial accounting documents of the enterprise, over other indications during their reflection in accounting and reporting as well as inclusion in accounting policy in the from of commercial secret;
- Provision of economic operations' planning. Provision of planning in preparatory work on maximum transformation of potential loss or liability into profit or asset and reflection of this in accounting or reporting during development of enterprise financial results;
- Provision of evaluation. Evaluation of primary and reinstated value of turnover and long-term assets of enterprises, liabilities and other valuables and comparison to market values.
Chapter II. Organisation of accounting
Article 7. Responsibilities of enterprise for organisation of accounting
1. Enterprise shall implement the accounting of its property, liabilities and all economic operations on accounting accounts in accordance with accounting standards developed based on this law, plan of accounting balance and other regulatory interrelated documents by application of «double recording» method.
2. Following shall be provided when implementing the accounting:
- Accurate reflection within the reporting period of separate economic operations, fulfilling the requirements of accounting standards and other regulatory documents on accounting, developed in accordance with accounting policy, approved for property evaluation depending on conditions of economic activities and this law, explanation in accounting reports of changes made in comparison with previous period;
- Complete and accurate reflection in accounting of property inventory results, liabilities, capital, payments and other valuables that have place by the reporting period (month, quarter, year). The accurate chronological sequence of economic activities shall be provided;
- Costs and incomes shall be accurately appropriated to relevant reporting periods;
- Approved accounting policy shall be followed within a reporting year.
Current production costs (turnover costs) and capital expenditures shall be clearly determined in the accounting. Analytic accounting data by the first date of each month shall be compared with synthetic accounting data for turnover and balance for the same date and their consistency and accuracy shall be established.
Article 8. Scope of accounting
Main scopes (goals) of accounting are the following:
- Targeted for financial groups, banks, tax authorities, investors, sellers, buyers, creditors, state authorities and other relevant entities and persons;
- Implementation of efficient supervision and management as well as complete and accurate formation of necessary data for the development of financial (accounting) statements to be submitted, and information on economic processes and financial/economic activities of enterprises;
- Provision of control over the use of labour, materials and funds in accordance with approved rules, regulations and cost estimates, over status and movement of property, right of ownership and obligations;
- Timely remedial of negative practices in financial/economic activities, determination and mobilisation of internal reserves.
Article 9. Organisation of accounting
1. The manager of enterprise shall be responsible for organisation of accounting at the enterprise.
2. The manager of enterprise shall establish necessary conditions for accurate implementation of accounting, provide the fulfilment of requirements on timely and accurate submission of documents and information, that shall be prepared by employees of various relevant departments and services, as well as follow the requirements of regulatory documents on accounting.
3. The manager of enterprise shall develop internal memos, resolutions, rules etc. on organisation and implementation of accounting, establishment of accounting policy, procedure of internal accounting reporting, inventory, labour and liability evaluation methods etc. He shall decide on accounting organisation form, procedure on application of documents and accounting data technology, develop internal accounting and reporting system, shall determine the procedure on control over economic operations that are necessary to implement the goals of accounting, persons authorised to sign documents etc.
4. The enterprise shall hold the right to separate the balance of its branches, subsidiaries, representations, production and other units that form the part of its structure; however, the indication of these balances shall be incorporated into the own balance o enterprise.
Article 10. Accounting Service
1. The accounting service of the enterprise is implemented by the independent structural units (offices, branches) that report directly to the management of enterprise. These shall be the following: accounting, centralised accounting, independent accountants, contracted accountants.
2. The work management is conducted by the manager of unit (office, branch) or the chief accountant. In enterprises that have no separate structural accounting services, the work can be contracted to specialised organisation or relevant expert.
3. Any person with accounting degree or who holds the status of independent accountant shall have the right to be the chief accountant. When necessary the duties of chief accountant can be assigned to persons who have no special educational background in accounting, provided that their professional experience in accounting is not less than five years.
4. Chief accountant or accounting supervisor shall control the compliance with general principles of accounting based on this law and all accounting standards developed in compliance with this law as well as other accounting regulating documentation.
5. Chief accountant or accounting supervisor shall provide the accurate reflection in the accounting accounts and accounting registries of all economic operations conducted by the enterprise, control, submission of routine data, development and submission of financial (accounting) statement within established time periods, as well as provide the analysis of financial/economic activities of the enterprise on accounting and reporting in order to determine and mobilise internal resources.
6. The chief accountant or accounting supervisor together with the head of enterprise shall sign the documents that set ground for acceptance and delivery of goods, materials and other valuables, monetary means, as well as payment, loan and financial liabilities. Without a signature of chief accountant these documents shall be deemed not valid and not to be executed.
7. The head of enterprise shall make written agreements on complete financial liability with persons who reached the age of 18 and are taking positions that are related with storage, treatment, sale (provision), transportation or use in production of valuables or persons that implement such activities. The list of such positions and works as well as the generic agreement on complete financial responsibility shall be approved by the Cabinet of Ministers of the Azerbaijan Republic.
8. In small sized enterprises that have no cashier other employee can implement the duties of the cashier based on written instruction of the head of enterprise.
9. When released from his duties, the chief accountant shall transfer the activities to the new chief accountant (and in his absence to the employee who is assigned to be the chief accountant by the instruction of the head of enterprise) upon the audit, clarification and documentation by commission appointed by the head of enterprise of the accuracy of accounting and reporting data. The act shall be executed in three copies and approved by the head of enterprise. First original copy of the act to be kept in accounting department.
Article 11. Independent accountant
1. Independent accountant is a natural person who holds the right to perform accounting operations on the territory of the Azerbaijan Republic based on the license issued by the Accountants Chamber of the Azerbaijan Republic.
2. Status, rights and responsibilities of the independent accountant shall be determined by the legislation of the Azerbaijan Republic.
Chapter III. Documenting and accounting registries.
Article 12. Primary accounting documents
1. Primary accounting documents that reflect the fact of implementation of economic activity shall serve as basis for recording into accounting registries.
Primary documents ( as well as hard copy and electronic carriers) shall reflect the following information:
- name, number, code, venue and date of the development of document (application), name of the enterprise where the document is developed, the content of economic activities and units of measure (in natural and monetary equivalent), positions, first/middle/last names, signatures and other identities of persons who hold the responsibility for execution, completion and documentation of economic operations.
Depending on the character of operation and accounting data development methods additional information can be included into the primary documentation.
Primary documentation shall be made for at the time of implementation of operation and if impossible- immediately after the completion of operation.
Persons who had prepared and signed above documents shall be responsible for their quality execution, timely submission for accounting and accuracy of information provided.
To prepare, regulate and control the data based on primary documents, overview accounting documents shall be made. These documents can be executed in hard copy and electronic information carriers.
Monetary and payment documents, financial and loan liabilities shall be signed as minimum by two people who have the right to put their signature in accordance with the list approved by the head of enterprise. First signature shall belong to person who performs general management at the enterprise and second to person responsible for supervision of accounting.
2. Representatives of legal persons or natural persons who participate in implementation of operations related with the delivery and acceptance of monetary means, valuables and other property on the basis of primary documents on copy of complete document shall be issued. The provision of persons participating in the operation by copies of documents shall be the responsibility of persons that document this operation at the enterprise.
3. Information in registered primary documents that is to be reflected in accounting shall be collected and systemised in accounting registries proposed by the Ministry of Finance of the Azerbaijan Republic or developed by the Ministries and main departments in compliance with general principles.
Information on economic operations conducted by the enterprise within a certain period of time shall be transferred from accounting registries to accounting accounts after groping.
4. Primary documents and accounting registries shall not contain any changes without explanatory note. The remedial of mistakes shall be approved by the signature of persons who had signed the document with indication of the date of changes. No changes are allowed in cashier or banking documents.
5. Primary documents, registries, accounting reports shall be kept in accordance with established procedure and timing.
Chief accountant shall be responsible for filing of documents for the entire period of work and timely transfer to archive.
6. The Ministry of Finance of the Azerbaijan Republic shall execute the control over primary accounting documents.
Article 13. Accounting registries
1. In order for information in primary accounting documents to be reflected in accounting reporting it shall be summarised and systemised in accounting registries.
Register shall be maintained in books (journals) divided into special sections, on separate lists, maps, when calculation technology is used- in machines, diskettes and other information carriers- continuously, in chronological order, systemised manner and by other methods of registration.
The procedure on formation of registries shall be regulated by accounting standards.
Enterprises maintaining the accounting registries on machine carriers shall provide the accounting with modern accounting technology and appliances.
2. All entrepreneur subjects on the territory of the Azerbaijan Republic shall maintain their accounting registries in Azerbaijani.
Registries of foreign accounting regulated by foreign accounting standards shall be translated into Azerbaijani when delivered to Azerbaijan. Accounting registries in Azerbaijani language when necessary for review or other purposes can be translated into other languages.
3. Chief (independent) accountant or person officially assigned by the head on enterprise shall be responsible for maintaining the main book, synthetic accounts schedule and filing of accounting registries and information reflected.
Article 14. Inventory of property and liabilities
1. To confirm the accuracy of accounting the enterprise shall implement the periodic inventory of property, liabilities, payments, capital and the valuables as well as all active and passive elements of balance in general.
2. With exception of cases when inventory is mandatory, the number of inventories within a reporting year, date of implementation, list of property and liabilities to be inspected during inventory shall be determined by the enterprise.
3. The inventory shall be mandatory in following cases:
- when enterprise leases its property, sells or buys the property, gets re-organised into municipal or state enterprise, joint-stock company or other enterprise;
- when inventory is conducted for complete, continuous inspection of property and liability status- until the preparation of annual (accounting) report not earlier than October 1;
- during enterprise liquidation- until the liquidation balance is developed and other cases stipulated by the legislation of the Azerbaijan Republic;
- if persons with financial responsibilities change or go for vacation (day of delivery and acceptance);
- when facts of stolen, damaged and misused property are recognised;
- in case of fire or natural disaster;
- during re-evaluation of valuables;
- if there is a n appropriate court order, decision of investigation officer or written prosecutor instruction;
- during privatisation, change of ownership status or legal person status the inventory is conducted by the agreement reached between the parties or by the order of state property management authorities.
4. Inventory of fixed assets can be conducted once in three years and of library fund-once in five years.
5. Enterprise provides the control over the movement of new material valuables that are established within the time from the start to end of inventory.
6. During the inventory and other inspections the amounts of actual property that differ from accounting data shall be regulated in following order:
- remains of fixed assets, material valuables, monetary means and other property shall be accounted to person with material responsibility at the place of operation with indication of persons in charge and reasons for appearance and amounts shall be directed appropriately; for enterprises- to results of economic activity (profit), for entities- to increase financial base (funds);
- damage and similar shortages and losses shall be assigned by the order of the supervisor. For enterprises is shall be assigned to production or turn-over costs, for entities it shall be directed to decrease the financing (funds) within natural decrease norms stipulated by relevant regulations;
- norms of natural decrease that can be established but not stipulated by the relevant norm may be determined by the owner;
- amounts of shortages and losses of fixed assets, material valuables, monetary means and other property (including damages, shortages and losses that exceed the norms of natural losses) shall be accounted to persons responsible with indication of reasons and persons responsible (at market price at the time of shortages and losses). In case when persons responsible are indicated and court refuses to satisfy the charges on compensation by persons responsible for damage and loss, the indicated amounts shall be written off as bad debts and charged at following accounts: for enterprises- as results of economic activities (losses), for entities- as decreased financial base (funds);
- as amounts of financial liability and payments are made to precision, deviations shall be regulated based on increase (decrease) of profit (loss) within a reporting year or accounted for debts reserve fund or other special funds.
Article 15. Protection of accounting information
1. The contents of internal accounting reporting, accounting registries and other similar documents shall be a commercial secret.
2. Nobody is entitled to review the above documents unless by the permit from the head of enterprise, based on court order, order of prosecution authorities and other cases, stipulated by the legislation of the Azerbaijan Republic.
3. Auditors and other inspection parties that are allowed to accounting books shall keep the information as commercial secret. Such persons shall hold the legal responsibility for disclosure of such information.
Article 16. Accuracy of registration in the business accounting
1. In the absence of an agreement between parties to operations, or a legal proof of registration of the business transactions documented and duly legalized in the business accounting registers.
2. Reflection of business transactions in the business accounting is considered to be correct if it corresponds to the 1st paragraph of this article and approved by the resolution of the appropriate authorities.
Article 17. Keeping the registers and documents of the business accounting
1. An enterprise has to keep the preliminary registration documents, accounting registers and the business accounting reports. The Head Archive Department at the Cabinet of Ministries of the Azerbaijan Republic establishes the shelf life of documents.
2. Card of accounts on business accounting, instructions on business accounting, method of coding, a software for up-to-date computers and regulations on use, previously applied methods of accounting and documents drawn up on their basis are kept in an accounts department for not less than five years to ensure possibility of conducting inspection of book-keeping.
Chapter IV. Property of an enterprise
Article 18. Fixed and intangible assets
1. Means of labour, which participate in the industrial sphere (a sphere of services) of an enterprise for more than one year, the price of which is controlled by standard documents, as the parts wear out transferring their cost onto the cost of the products (services) by norms established by Legislation, and retaining their natural shape in the production (services) process, are called the fixed assets.
2. Buildings, installations, transfer mechanisms, machine tools and power plants (equipment), computers, transport facilities, instruments, industrial and economic inventory (outfits), works-stock and productive-stock, long-term planting, inter-economic roads, private lands, investments into land improvement (melioration, drainage, irrigation, etc.) and other works (purposes), and also other facilities are related to the fixed assets.
3. Accomplished capital cost on rented buildings, installations, equipment and other fixed assets are included by the lessor into the list of fixed assets at the rate of actual cost (unless other conditions are provided by the lease agreement).
4. Lands, which are the property of an enterprise, are reflected in the business accounting and book keeping according to actual expenses incurred for their acquisition.
5. The fixed assets of an enterprise are reflected in the business accounting and book-keeping according to their preliminary cost, i.e. at the rate of the actual expenses incurred for their purchase, installation and preparation. When revaluing, reconstructing, completing, after-equipping the fixed assets (except for lands, which are at the property of the enterprise) and partial liquidation of related to them objects preliminary costs of the fixed assets may be changed.
To the amount of the fixed assets of the enterprise (except for lands, which are at the property of the enterprise) during their exploitation term will be calculated a deterioration (amortization) according norms established by Legislation, and these calculated sums are included in the production (turnover) cost.
Deterioration is not calculated to the fully deteriorated fixed assets.
A total sum of deterioration of the fixed assets is reflected in the accounting and book keeping separately.
6. In case of sale or other retirement of the fixed assets profits and losses on these operations are related to the results of the economic activity of the enterprise.
7. In budgetary financed organizations, regardless of the date of financial year, in which the fixed assets were purchased, built, or installed, at the end of the year deterioration is calculated to them for the whole year according to norms established by Legislation. The calculated sum is separately reflected in the accounting.
8. The following are not related to fixed assets and are taken into account at enterprises – in the list of floating assets, in organizations- in the list of items of little value and other reserves:
a) items with service life less than a year, regardless of the cost;
b) valuables participating in the production process (rendering services) once, fully transferring their cost onto the cost of the product (services) and retaining the natural shape in this process;
c) means of labour of any service life ( except for agricultural machines, instruments, mechanized construction tools, work and product stock , which are related to the fixed assets regardless of their cost and service life), the unit (set) cost of which is lower than the minimum cost of fixed assets established by related standard documents. For correct accounting of the items in composition of the floating assets in the accounting period the manager of the enterprise has the right to set a minimum limit on their cost. If necessary, the established limit depending on the inflation level may be changed;
d) fishing gear regardless of the cost and service life (drag-nets, all types of nets etc.);
e) petrol saw, wood-working machine, trigger ropes applied on rivers, seasonal roads, temporary hinged roads for transportation of timber, temporary forest houses, which have been used for two years, movable housings, boiler points and other facilities (means of labour) of a temporary and well-timed character;
f) special mechanisms and tools made for individual offers, chain and mass production, work pieces regardless of their cost;
g) working clothes, boots, and also bedding regardless of their unit(set) cost and service life;
h) working clothes given to workers at enterprises; clothes and boots given at health institutions, institutions of education, social protection of population and in other budgetary organizations regardless of their unit (set) cost and service life;
i) temporary (untitled) specially made mechanisms, installations and other (out of title) constructions, cost of which is included in a prime cost of building and assembly jobs as overhead charges;
j) containers for storage of inventory holdings at warehouses or during the technological process, the unit cost of which is lower than the minimum level of cost of the fixed assets established by appropriate normative documents;
k) items designed for renting regardless of their cost;
l) young animals and fattening animals, birds, rabbits, furry animals, bee-hives and laboratory animals;
m) long-term plants grown up at nursery farms for transplantation.
9. At enterprises, as the facilities and items of labour provided by closure 8 of this article (except for sub-closures «f», «j» of closure 8 and sub-closures «k», »l» of the same closure , which are calculated deterioration) are released from the warehouse for exploitation, deterioration is calculated to 50% of their unit (set) value and another 50% is written off during exploitation as they become useless and these costs are related to losses with deduction of possible cost of use.
As the items of little value, the unit (set) cost of which is one twentieth of the minimum level of the cost of fixed assets established by appropriate normative documents, are released for exploitation, their cost can directly be related to the outlays. To ensure safe keeping of aforementioned items the enterprise establishes the necessary control over their movement during the exploitation.
As the special mechanisms and tools made for special offers, either for chain production or mass production of goods, are released for exploitation, their value is paid in accordance with special norms established by the enterprise. It is also accepted to directly relate their cost to outlays.
Cost of goods and items for rent are paid be means of calculating deterioration according to service life.
10. Items and valuables provided by closure 8, in the business accounting and book keeping, are reflected according to their preliminary values, i.e., amounting to the actual cost for their purchase, construction or manufacture. At enterprises the deterioration value of the aforementioned items and valuables are separately reflected in the accounting and bookkeeping.
11. To the intangible assets of the enterprise are related the right for using lands and natural resources (valuables), patents, licenses, know-how, software, exclusive (priority) right (including licenses given for types of private practice), organization expenses, trade marks, etc., which are used in the economic activity for a long time and bring profit.
Intangible assets are reflected in accounting and bookkeeping of expenses(as per preliminary value), incurred for their purchase and bringing in a proper condition for use in planned objectives, and as they are used, monthly (equally) deterioration is calculated to their value in accordance with special norms of deterioration established by the enterprises according to exploitation term, and the obtained sum is paid off by writing off to the cost of product (services) and turnover expenses. The norm of deterioration for intangible assets, upon which definition of a useful life is impossible, is established for ten years (not longer than the term of economic activity of the enterprise) . Deterioration of intangible assets is separately reflected in accounting and bookkeeping.
Article 19. Raw product, materials, ready products and goods
1. Raw product, base and accessory materials, fuel, purchased half-finished products, component parts, spare parts, containers and other material reserves used for packing and transporting products (goods) are reflected in accounting and bookkeeping according to their actual prime cost.
Actual prime cost of material reserves is established according to expenses on their acquisition (except for Value added tax), including percentages on mentioned reserves given by seller of the goods for credit, expenses on procurement, markups (rises) paid to foreign economic organizations, commissions , cost of commodity exchange, customs fees, expenses on transportation and storage, which are carried out by forces of other organizations, and other expenses.
Actual prime cost of material reserves written off to production is determined according to one of the methods of evaluation of reserves (by average prime cost; prime cost of those received first in time; prime cost of those received last in time).
2. Ready product is reflected in the balance sheet according to either actual or planned (normative) prime cost.
3. At enterprises of trade, procurement and sale, goods are reflected according to their retail or purchase price. If the goods are registered according to the retail, the difference between their purchase price and the sale price (preference, markup) is reflected in a separate item of account.
If an enterprise takes into consideration the sale of product (goods, works, services) as they are paid by purchaser (client) by payment documents, in this case loaded goods, commissioned works or delivered services are reflected in the balance sheet according to the actual or planned (normative) prime cost including expenses on shipment, which must by paid by purchaser (client) on top of the agreed (contract)price.
4. Valuables provided in closures 1,2, 3 of this article, costs of which were reduced during a year, or became morally out of date and partially lost their previous quality, are reflected on the balance sheet at a possible sale price at the end of the accounting year, and if these prices are lower than the preliminary quota purchase prices – the difference between prices are related to the results of the economic activity.
Article 20. Goods in process and deferrals
1. A product (work), which did not pass through all the phases (periods, limits) provided by the technological process, and also goods, which are not completed, not passed the test and technical take-over are related to the goods in process.
2. Goods in process in a mass and chain production may be reflected on the balance sheet according to the normative (planned) industrial prime cost, or on direct (straight) items of expenditure, and also on the cost of the raw products, materials and half-finished products.
At production of a piece product goods in process are reflected on the balance sheet on the actual field costs.
3. Expenses incurred during the accounting period are not related to future accounting periods, they are reflected in a separate item of account as deferrals and are related to either field cost or turnover expenses or to respective resources for a term, to which they relate.
Article 21. Stocks and reserves
1. Authorized capital stock reflects the sum-total of shares (in terms of money), which were invested by the shareholders (owners) into the enterprise at the time it was set up at a volume provided in constitutive documents to ensure the activity of the enterprise.
The authorized capital stock and actual debts of shareholders (owners) as per investments into the authorized capital stock are separately reflected in the accounting and bookkeeping.
2. To pay out the casual losses and damages the enterprise in an established order creates a surplus fund from its profit. Unused surplus of funds passes by turns.
3. An enterprise may create a surplus fund for its uncertain debts to pay out for products, goods, works and services delivered by other enterprises relating the surplus amount to the outcome of the economic activity.
Uncertain debts are considered to be accounts receivable not paid out by the enterprise on term and which do not have an appropriate assignment.
4. Reserves for uncertain debts are created at the end of the accounting year, on the basis of inventory results of account receivable of the enterprise.
The volume of reserves is separately established by each uncertain debt, depending on the financial condition (creditworthiness) of the debtor and possibility of full or partial discharge of debt.
If any part of these reserves is not used till the end of year following the year, in which the reserves for uncertain debts were set up, unused surplus amount will be added up to the profit of the respective year.
5. With the purpose of inclusion of forthcoming expenses in either field cost or turnover expenses of the accounting period the enterprise may set up a reserve fund to pay out forthcoming vacations of the employees, annual premiums for long-term employment, repair expenses on fixed assets, field cost on preparation works on the seasonal areas of the industry, forthcoming expenses on repair of leased items, premiums according to outcome of the year and other objectives (included in expenses according to specific character of the industry and provided for in the prime cost of products, works and services on the basis of appropriate normative acts of the Azerbaijan Republic).
Article 22. Accounts with debtors and creditors
1. Each party in their bookkeeping reflects accounts with debtors and creditors in amounts, taken from the accounting records, which they consider correct. Liabilities on acquired bonds are recorded taking into account percentages subject to payment at the end of the accounting period.
2. Amounts on accounts with bank institutions, finance and tax authorities, which have to be reflected in bookkeeping, must be identical and coordinated with mentioned institutions and authorities. It is not permissible to leave on the balance sheet undigested amounts on these accounts.
3. The remainder of funds on dollar accounts of the enterprise, other funds in foreign currency (including financial documents), securities, accounts receivable and accounts payable are reflected in the reports according to the rate established by the National Bank of the Azerbaijan Republic on the last date of the accounting period in sum established by means of recalculation of foreign currency into the national currency - manat.
4. Amount of penalties, fine, sanction received by the debtor or there is a resolution of court and arbitration on withdrawal of the aforementioned, are related to the outcome of the economic activity (financing); until these amounts are received or paid off they are debited or credited in the account of the person who receives or pays off the debt.
5. Accounts receivable with elapsed term of claim, impossible to deduct (withdraw), other bad debts according to resolution of the managing director of the enterprise are written off at the expense of reserve funds for uncertain debts, or they are related to the outcome of the economic activity, and at institutions- reduction of financing (funds), if the reserve was not set up on these amounts in a period preceding the accounting period as provided by closure 4 of this article.
Amount of debt, which is written off because of insolvency of the debtor, does not mean its liquidation. Starting with the moment as the debt was written off, during five years it will be reflected on the balance sheets to establish the control over possibility of deducting it.
6. Creditors and depositors amounts of liabilities with elapsed term of claim are paid to the state budget, unless otherwise provided by Legislation of the Azerbaijan Republic.
7. Losses generated as a result of natural disaster by resolution of the managing director is written off at the expense of the reserve fund or they are related to the outcome of the economic activity of the accounting year ( if a reserve fund was not set up in the enterprise or there was not enough fund) or to reduction of financing (funds).
Article 23. Profit (losses) of enterprise
1. Balance sheet profit (losses) on the basis of business accounting concentrates in it the profit (losses) from the sale of fixed assets of the enterprise, other property, product (works, services), as a final outcome of the economic activity and estimation of balance sheet items in accordance with this law, and also incomes received from non-realization operations (with deduction of amounts of expenses incurred for these operations).
2. Profit (losses) from sale of products (works, services) and goods are determined according to acting prices in the form of difference between the income received from sale of product (works, services) and expenses incurred for production and sale without taking into account taxes and other mandatory payments established by Legislation of the Azerbaijan Republic.
An income received from sale is determined depending on characteristics of enterprise management and conditions of contracts concluded (i.e. at non-cash settlements – according to amounts on the basis of payment documents entered either settlement or running account of the enterprise in the bank, and at cash settlements – according to amounts entered the cash office of the enterprise), or for sold and paid products, goods, services or for shipped products, goods, commissioned works, delivered services as the payment documents were presented (without payment) to the buyer (client ).
3. Profit or losses determined for the accounting year not relating to operation of previous years are included in the outcome of the economic accountability of the year.
4. Incomes received during the accounting period not relating to the future accounting periods are reflected in a separate item of business accounting and bookkeeping as deferred revenue. At the beginning of the accounting period these revenues are included in the income of economic activity of the accounting period, to which these revenues relate.
5. Balance sheet profit (losses) of the accounting period and use of it is separately reflected on the balance sheet. Liability of the balance reflects the received profit and use of it in the form of an advance and a retained income, and in the assets of the balance – actual incurred losses. In the total of the balance sheet are included only uncompensated losses or retained income for the accounting year and previous years.
Chapter V. Assessment, capital and financial investments
Article 24. Necessity of assessment in business accounting
1. For correct reflection in business accounting and bookkeeping its property, capital, liabilities, floating assets, funds and all economic operations of the finance-economic activity the enterprise has to ensure their correct assessment according to preliminary or replacement cost (in accordance with the market prices), and at necessary periods – re-evaluation of them.
2. Methods of assessment are determined in accordance with this law, standards of business accounting and other legislative acts of the Azerbaijan Republic.
3. In business accounting I is permissible to assess property, capital, liabilities, floating assets, funds and other economic operations of the economic activity of the enterprise in sum rounded to full a manat. The difference as a result of this is related at enterprises – to outcome of the economic activity, at institutions – to increase (reduction) of financing (funds).
Article 25. Currency transactions in business accounting
1. An enterprise carries out the assessment and re-evaluation of its property, liabilities and capital, floating assets, funds and all economic operations of the finance-economic activity in the national currency of the Azerbaijan Republic – manat.
2. An enterprise assesses all transactions with foreign currency according to foreign currency exchange rate established by the National Bank of the Azerbaijan Republic effective on the date of transaction, and each time as the exchange rate changes it re-evaluates the foreign currency in its foreign currency account.
3. When re-evaluating the foreign currency (by its types) in the foreign currency accounts in accordance with the exchange rates established by the National Bank of the Azerbaijan Republic the difference between rates each time at the end of the accounting year is related to the profit of the enterprise, unless otherwise provided by appropriate normative documents of the Azerbaijan Republic.
4. Transactions with foreign currency through bank accounts, on liabilities and settlements, and also stocks of materials received in foreign currency, intangible assets, securities and other types of property in business accounting are reflected in manats, in sum determined after re-evaluation of the foreign currency by method of converting according to foreign currency exchange rate established by the National Bank of the Azerbaijan Republic effective on the date of transaction.
At the same time above-mentioned records are reflected in an analytical accounting of foreign currency settlements and payments.
5. Remainders of funds in foreign currency accounts in banks and in other credit institutions, other monetary funds including financial documents, securities, accounts receivable and accounts payable in foreign currency are reflected in the financial (accounting) reports in sum determined after re-evaluation of foreign currency by means of conversion according to foreign currency exchange rate established by the National Bank of the Azerbaijan Republic on the last date of the accounting period.
Article 26. Assessment of floating assets
1. With the purpose of coordinating its floating assets with requirements of re-production to ensure the constant industrial activity in conditions of market economy the enterprises correctly assesses its floating assets according to the preliminary or replacement cost (in accordance with the market prices) according to standards of the business accounting.
2. To ensure the control over the correct assessment of the floating assets according to market prices and over their sale taking into account demands and offers, and also rate of inflation the enterprise has the right to set up a standing assessment committee.
3. The assessment committee documents the correct assessment of the floating assets according to market prices, and at necessary periods- their re-evaluation in compliance with the accounting registers, and timely presents documents to the accounting office.
4. When selling the remainders of old goods from the warehouse their cost (except for prices regulated by the state) are assessed, at least, according to the price of goods or products of the same name (assortment, type, mark), which were produced last on this date.
5. Price increase during assessment, an in case of necessity- when re-evaluating the remainder of the floating assets, is related to the profit of the enterprise unless otherwise is provided by Legislation of the Azerbaijan Republic.
6. Losses because of poor quality and material floating assets and their prices, reduction of prices of securities, which are estimated at stock exchanges, losses incurred as a result of drop in foreign currency rates are related to losses of the enterprise unless otherwise provided by Legislation of the Azerbaijan Republic.
Article 27. Assessment of depreciable property
1. Fixed assets and intangible assets are recorded at their full original prices.
2. Cost of fixed assets and intangible assets are offset according to norms of deterioration (depreciation) calculated in accordance with their service life or norms of deterioration (depreciation) established by the Cabinet of Ministers of the Azerbaijan Republic. Deterioration (depreciation) is not calculated to cost of lands. Calculation of deterioration (depreciation) on items of little value is carried out by a simplified method.
3. The enterprise assesses its fixed assets in cases, provided by Legislation of the Azerbaijan Republic.
During re-evaluation the difference between the preliminary and replacement costs remains at the disposal of the enterprise and is directed to necessary goals in accordance with Legislation of the Azerbaijan Republic.
4. With the consent of the Ministry of Finance of the Azerbaijan Republic enterprises may apply accelerated norms of deterioration. In cases, when the amount of deterioration (depreciation) negatively affect on the economic activity of the enterprise with the consent of the Ministry of Finance of the Azerbaijan Republic for norms of deterioration (depreciation) may be applied a reduction, coefficient (these coefficients must not be lower than 0.5).
5. Cost of fixed assets leased on the long-term basis with the right of purchase and sale (unless otherwise provided by the contract) may be offset by an equal calculation of deterioration (depreciation) except for the percentage paid to Lessor according to the contract on terms of the lease.
Article 28. Capital and financial investments
1. Capital investments include expenses on building and assembly jobs, purchase of equipment, tools, inventory and other fundamental works (design-survey, geologic-survey and drilling works, expenses on land allocation and re-settlement of land areas in connection with construction, training specialists for new enterprises under construction etc.). Capital investments are reflected according amounts of actual expenses on the balance of the organization or the client carrying out the construction works.
2. Objects of capital development being in temporary exploitation until they are commissioned for a steady exploitation are not included in the list of fixed assets. Amounts of expenses on the aforementioned objects are reflected in the business accounting and bookkeeping as incomplete capital investment.
3. Finance investments include the authorized fund of the enterprise, securities, and also loans and other investments granted to the enterprises located in the territory of the Azerbaijan Republic and beyond its boundaries.
For investors the financial investments are taken into account in sum of actual expenses. The difference between the amounts of the actual expenses for acquisition of bonds and between other long-term liabilities and their standard value while they are in circulation is every month equally related to the outcome of the economic activity.
If the investor has the right to receive dividend and is fully responsible for financial investment fully paid shares are reflected on the credit site of the balance sheet by the full purchase price, and unpaid amounts-on the debit site of the balance sheet in the item of «creditors». In other cases the amount transferred for acquisition of shares and stock certificates are mentioned on the credit site of the balance sheet in the item of «debtors».
If the stocks and other long-term liabilities of the enterprise are assessed on exchanges and off-exchange markets (if these prices are regularly commented on the press) and participate in the recurrent market their price in the annual accounting balance sheet will be reflected by last market prices, and the difference between the previous book value is directed to the outcome of the economic activity.
4. Authorized capital stock of the enterprise is set up according to rules established by the founders at the expense of their membership fees and sale of stocks (shares). The founders assess stocks of materials and capital equipment and intangible assets invested in the form of authorized capital stock by real market prices.
5. Revenues of joint-stock companies from issues (amount of issued stock certificates, which exceed the nominal price), amount of returns form the assessment of material assets of the enterprise, other received similar valuables without return are taken into account as additional capital.
6. An enterprise has the right to set up a reserve fund and reserve capital from its net income (remaining at its disposal), and spend them by assignment.
Article 29. Social assignment fund
An enterprise may set up a social assignment fund to render welfare and other social needs from its profit remaining in its disposal.
These funds are taken into account in the business accounting separately.
Article 30. Mortgages and security
1. The cost of property invested in the form of mortgage (including monetary funds) is separately taken into account by the enterprise as miscellaneous assets.
Securities given without property or cash mortgage are reflected in business accounting in separate off-balance accounts.
2. The cost of property received in the form of mortgage (except for monetary funds) is reflected in the separate off-balance account. Monetary and foreign currency funds received in the form of mortgage are reflected in the balance accounts especially as amounts of received securities.
Chapter VI. Financial bookkeeping
Article 31. Constitution of the financial bookkeeping
1. Constitution of financial bookkeeping of an enterprise (except for budgetary organization) is mainly formed out of accounting balance and attached to it reports about financial results (income and losses) and their use, movement of property, funds, floating assets, private capital, monetary funds, intangible assets, financial and capital investments and other assets and liabilities.
In accordance with the standards of business accounting other forms of reports and explanations may be attached to the above-mentioned reports.
Mutual compensations (payments) between the items of assets and liabilities of the balance are forbidden.
The Ministry of Finance of the Azerbaijan Republic approves samples of forms on financial bookkeeping.
Ministries and central administrative boards of the Azerbaijan Republic, with the consent of the Ministry of Finance of the Azerbaijan Republic, in addition to the samples of forms may approve special forms of bookkeeping in accordance with the specific character of the enterprise of their own system.
2. Banks, insurance, tax and other state authorities approve instructions on conducting a primary accounting, accounting (financial) reports and rules of their completion with the consent of the Ministry of Finance of the Azerbaijan Republic.
3. In explanations attached to financial (accounting) reports enterprises give a full and clear analyses of their industrial and financial-economic activity and information about changes in their bookkeeping politics in the next accounting year.
Article 32. Accounting period
The period from the 1st of January to the 31st of December is considered to be an accounting year for all enterprises. For newly established enterprises the 1st accounting year is considered to be the period from the date of receiving the status of the legal person till 31st of December, and for enterprises, which were established after 1st of October (liquidated, reconstructed and not based on the basis of the organization departments) an accounting year will be the period till 31st of December of the next year.
Article 33. Corrective actions in the financial bookkeeping
Information given in business accounting is based on the information of synthetic and analytical calculation.
Records of the introductory balance sheet must correspond to the facts of the approved final balance sheet for the period, which proceeded the accounting period. Upon change of the introductory balance by the 1st January of the accounting year reasons of changes must be explained. If in the accounting reports are discovered corrections, which relate both to the current and the previous years (after the approval of reports), corrections are made in the reports drawn up for the accounting period, in which have been discovered defacement of facts. Correction of mistakes in the report is approved by signature of the person who signed this report putting the date on it.
Article 34. Procedure on submission of financial (accounting) reports
1. Accounting (financial) report of the enterprise for the accounting period (month, quarter, year) is a final phase of the calculation process. In this report in ascending powers is reflected movement of the property, floating assets, intangible assets and, in all, assets and liabilities by items of the balance sheet, financial condition and outcome of the economic activity.
An enterprise (excluding subjects of a small business and enterprises with foreign investment) submit quarterly and annual accounting reports:
- To owners (partners, founders in accordance with the constituent documents);
- To authorities of tax inspection;
- To State bodies of statistics;
- To other legislation authorities, which are empowered to conduct inspections and receive appropriate reports in accordance with Legislation of the Azerbaijan Republic.
Enterprises, which are fully or partially at municipal or state property, submit their quarterly and annual financial (accounting) reports not only to authorities mentioned in this law, but also to authorities, which have the right to manage the state and municipal property.
To other addresses financial (accounting) reports are submitted in cases provided by the constituent documents or Legislation of the Azerbaijan Republic.
2. Tax declaration and other tax reports are submitted to the
tax inspection in the territory of location of the enterprise.
3. Enterprises submit quarterly (accounting) reports in 30 days after the end of the quarter, and annual financial (accounting) reports – not later than 90 days after the end of the year.
4. Budgetary institutions submit monthly, quarterly and annual financial reports to the high organs at terms established by these organs.
Exact term for submission of financial (accounting) reports in the frame of above-mentioned terms is determined by founders (partners) of the enterprise or the high organs, or the state authorities< which have the right to accept these reports.
Subjects of small business and enterprises with foreign investment submit annual financial (accounting) reports by the 15th of March following the accounting year, in the order provided by the constituent documents, to each partner (owner) of the enterprise, to the state authorities of statistics and in an order stipulated by tax legislation - to tax authorities.
5. The Ministries, central administrative boards and other management authorities, financed from the budget, accordingly submit monthly, quarterly and annual review financial (accounting) statements of fulfillment of expenditure items of budgetary institutions to the Ministry of Finance of the Azerbaijan Republic at the terms established for them.
The Ministries, central administrative boards of the Azerbaijan Republic submit quarterly review accounting statements of their own organizations to the respective executive power bodies not later than 45 days after the end of the accounting period, and the annual accounting reports – not later than 25 April after the end of the accounting year.
Article 35. Publication of financial accounts
After the appropriate control authorities having an independent right have approved reliability and correctness of the financial (accounting) reports of the enterprise, these reports may be published for legal and physical persons, and also for all interested users, partners and other authorities.
Article 36. Financial bookkeeping of liquidated enterprises.
1. In accordance with Legislation of the Azerbaijan Republic the enterprises, which have been liquidated in the established order (upon bankruptcy, free liquidation and in other cases), draw up a final review financial (accounting) report by the date of announcing the bankruptcy by court or another date determined when making decision on liquidation.
A liquidation committee carrying out liquidation of the enterprises.
Bears responsibility for keeping books on operations connected with the liquidation of the enterprise, drawing up the liquidation balance sheet and financial (accounting) reports.
The property of the enterprise is reflected in prices determined by the liquidation committee (i.e. taking into account actual possible sale price of items).
Bad debts and losses are not included in the liquidation balance sheet.
Liabilities of the liquidated enterprise has to be defined exactly and equally reflected on the liquidation balance sheet by sections in percentages starting with the date of payment.
Chapter VII. Regulation of business accounting and bookkeeping
Article 37. The authorities dealing with regulation of business accounting and bookkeeping
1. Creation of the unified system of business accounting and bookkeeping in the Azerbaijan Republic, its constant development, its updating and control over these works are carried out by the Ministry if Finance of the Azerbaijan Republic with participation of respective authorities.
2. The National Bank, State Committee on Statistics, State insurance inspection of the Cabinet of Ministries, Head state tax inspection and in accordance with Legislation of the Azerbaijan Republic other authorities coordinating with the Ministry of Finance of the Azerbaijan Republic regulate the business accounting and bookkeeping of banks, insurance organizations and other similar state authorities, and also other economic subjects carrying out specific functions.
3. Creation and distribution of all normative documents in the sphere of business accounting in the Azerbaijan Republic, their form and requisites are carried out only with the consent of the Ministry of Finance of the Azerbaijan Republic.
Article 38. Goals and objectives of regulating the business account and bookkeeping
1. The main objective of state regulation of the business accounting and bookkeeping is to create in the Azerbaijan Republic a unified system of business accounting capable to meet the principals accepted in the international world, and standards of business accounting, providing it with appropriate legal and methodical background, with forms of accounting and bookkeeping.
The goal of regulating the business accounting and bookkeeping consists of provision of legal and physical persons with comparative information about the property and financial condition, profit and losses of the enterprise.
2. The main objective of regulating the business accounting is:
a) Creation of mandatory and unified standards on conducting business accounting and bookkeeping identically protecting the interests of partners of the economic process;
b) Establishing mandatory normative instructions both for a legal basis and also for creation and use of specific accounting information in the interests of state authorities, proprietors and other users;
c) Determination of the legal status of professional workers dealing with business accounting and bookkeeping;
d) Development of the national forms of business accounting and bookkeeping in accordance with principals accepted in the international practice.
Article 39. Public association of accountants
In accordance with Legislation of the Azerbaijan Republic to protect the interests of accountants may be established their public association.
Article 40. Control over fulfillment of standards of the business accounting and legislation on it
1. The control over implementation of Legislation of the Azerbaijan Republic on business accounting and its standards is carried out by the Ministry of Finance of the Azerbaijan Republic, other state authorities, administrations of enterprises and internal inspectors.
2. The audit organizations and other inspection authorities during conducting inspections determine correspondence of conducting the business account with this law, standards of business accounting and other normative documents.
3. The ministries and central administrative boards constituting review accounting (financial) reports revise the financial-economic activity and condition of the business accounting of their own enterprises and organizations not less than once in three years.
4. The legal persons carry out a constant control over business accounting of their own (with an independent balance) representatives, divisions, industrial areas, small-scale enterprise and other sub-divisions.
Article 41. Responsibility for violation the Legislation on business accounting
1. To legal persons and other economic subjects, which violate this law, avoid conducting a business accounting, incorrectly apply the standards of business accounting, and also deliberately falsify the bookkeeping, are applied sanctions provided by Legislation of the Azerbaijan Republic.
2. Persons, who are responsible for conducting business accounting and violation of the law on it in accordance with the Closure 1 of Article 9 and Closure 1 Article 12 of this law, bear responsibility in accordance with Legislation of the Azerbaijan Republic.
President of the Azerbaijan Republic
Baku, March 24th , 1995
With amendments No 880-IGD, dated 16 May, 2000;№ 219-IIGD, 23 November, 2001; 30 April, 2002, № 317-IIGD.
Published in «Bulletin of the Supreme Council of the Azerbaijan Republic», 1995, № 17-18, article 277.