If the problem of early accruals cannot be solved at the organizational level for any reasons, reliability of reporting for the Parent company can be ensured through making a special transformational adjustment.

The essence of the adjustment (take the expense accrual for example) is fairly simple:

Stage 1 – Accrual: if the Company has already incurred the expenses by the reporting date, but these have not yet been accrued in local accounting, the adjustment adds the requires amount to the relevant expense account in the profit & loss statement (hereinafter - PL), along with adjusting the required debt account in the balance sheet (hereinafter - BS).

In doing so, please pay attention to which BS account is being adjusted. If the company has already made the payment to the contractor against the accrued expenses (i.e. the local accounting shows debit balance of the “advances made” account), we make the adjustment through this account. If the money has not been transferred to the contractor, we adjust the “trade payables” account.

Stage 2 – Reversal: After the expenses have finally been accrued in local accounting, the amounts on relevant PL and BS accounts in local and IFRS reporting are aligned, i.e. the adjustment effect at the reporting date is nullified.