The Distinction between RAS and IFRS in Company Reporting
1. Historical Context and Evolution of Standards
The Emergence of RAS in Russia
The Russian Accounting Standards (RAS) were first approved by the Ministry of Finance of the Russian Federation under order No. 34n in 1998 to transform the Soviet system into a market-oriented one. The primary objective was to synchronize accounting practices with the requirements of tax legislation and regulatory bodies.
The Introduction of IFRS
IFRS have been developed since 2001 based on the International Accounting Standards (IAS). Their goal is to create a unified international framework for the comparison of financial statements and to enhance investor trust.
2. Forms of Financial Reporting
Balance Sheet
RAS classifies assets and liabilities based on liquidity, whereas IFRS categorizes them as “current” or “non-current” based on their time frames. The revaluation of financial instruments at fair value is permitted.
Income Statement
IFRS requires the disclosure of “other comprehensive income” and the breakdown of expenses by function or nature, allowing analysts to gain deeper insights into the expense structure.
Statement of Cash Flows
IFRS encourages the direct method, which shows individual items of receipts and payments, while RAS mandates the indirect method with adjustments to net profit.
3. Revenue Recognition and Asset Valuation
IFRS 15: Five Steps
The IFRS 15 approach requires: (1) identifying the contract, (2) determining performance obligations, (3) establishing the transaction price, (4) allocating the price to performance obligations, (5) recognizing revenue as performance obligations are satisfied. This minimizes subjectivity and improves comparability.
Revaluation at Fair Value
IFRS 13 introduces three levels of inputs: market quotations (Level 1), observable inputs (Level 2), and unobservable assumptions (Level 3), enhancing transparency and the detail of disclosures.
4. Consolidated Financial Statements and Taxes
IFRS 10 Requirements
Control under IFRS 10 is defined by the ability to direct activities, obtain benefits, and manage risks. The consolidated financial statement includes all subsidiaries, considering the "minority interest."
Deferred Tax Calculation
IAS 12 recognizes assets and liabilities for all temporary differences, requiring discounting and the assessment of the likelihood of using the tax asset based on projected financial models.
5. Disclosures and Notes
Risk Disclosure
IFRS IAS 7 and IFRS 7 require detailed descriptions of credit, currency, price, and operational risks, including stress testing and scenario analyses.
Disclosure of Estimation Assumptions
IAS 1 mandates the disclosure of significant assumptions and going concern, including sensitivity analyses of key assumptions (e.g., interest rates or revenue growth rates).
6. Practical Cases of IFRS Implementation
Sberbank: Phases and Costs
The IFRS project at Sberbank lasted three years and cost 1 billion RUB. The phases included: auditing RAS, developing IFRS accounting policies, IT adaptation, training 500 employees, and external auditing.
Gazprom Neft: Impact on Financial Metrics
The revaluation of oil fields at fair value increased the equity by 15% and enabled the issuance of an additional €500 million in Eurobonds.
7. Transition to IFRS: Step-by-Step Process
1. Readiness Assessment
Analyzing existing RAS procedures, IT infrastructure, and personnel resources. Gaps between current reporting and IFRS requirements are identified.
2. Development of Accounting Policies
Formulating sets of accounting policies that comply with IFRS, including revenue recognition, assessment of financial instruments, and property.
3. Migration of IT Systems
Integration of IFRS modules into ERP systems: SAP, 1C:ERP. Configuration of automated calculations for deferred taxes and fair value.
4. Training and Communication
Conducting training sessions for accountants, financial analysts, and management, and developing methodological materials and an “implementation roadmap.”
5. Pilot Reporting
Preparing trial IFRS reports for past periods to test processes and conduct external audits before the first "official" report.
6. External Audit and Confirmation
Engaging international audit firms (Big 4) to verify compliance with IFRS, address findings, and publish the report.
8. Impact on Company Valuation and Investment Attractiveness
Improved Comparability
IFRS reports allow investors to conduct horizontal analysis of companies from different countries and sectors, reducing the risk of information asymmetry.
Asset Revaluation
Fair value reflects the current market price, reducing the risk of hidden impairments and increasing the reliability of the balance sheet.
Impact on Key Ratios
The use of IFRS alters profitability metrics (ROE, ROA) and leverage ratios (Debt/Equity) due to different assessments of equity and liabilities.
Attracting Capital
Companies with IFRS reporting are 20–30% more likely to secure international loans and favorable borrowing terms due to increased transparency and investor confidence.
Conclusion
A deep understanding of the differences between RAS and IFRS enables companies to strategically plan their reporting: to retain RAS for internal accounting processes and apply IFRS for attracting external capital. The transition requires a comprehensive approach: methodologies, IT, training, and auditing, but enhances transparency, comparability, and investment appeal.
