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student at the Department of Finance and Accounting of the National University of Ostroh Academy
PhD, senior lecturer
Peculiarities of implementation of accounting policy at the company
The article defines the essence of accounting as a factor of influence on management process. The concept of “accounting policy” as part of the accounting system is defined. The importance of subordination of accounting policy elements to the goals of management process are identified and analyzed. The article considers methodological approaches for improving the accounting policy in the management of the company.
Keywords: accounting system, accounting policy, financial reporting, accounting information, management system.
Setting of a problem. At the present stage of market relations in Ukraine the characteristics inherent for market are becoming more a more prominent – manufacturing competitiveness, efficiency, timeliness and risk of decisions. An important condition for the effective functioning of the business entity in any area of the economy is an efficiently generated accounting system. It is a special impact factor on decision-making and control of all the activities of the company.
The aim of the article is to provide a detailed analysis on the implementation of accounting policy as well as factors affecting its implementation at the companies and the improvement of this technique.
Main material. There are three main approaches to the formation of the company management system, namely: resource, process and organization, which can be interpreted also as approaches to the formation of accounting policy. Given that, the process approach has significant advantages.
The functioning of the accounting system and its maintenance requires appropriate institutional infrastructure that provides solutions to a number of methodological, technological, technical and organizational issues. In the process of their solving, the owner of the company together with chief accountant implements his accounting policy by an independent choice of accounting methods and procedures [1, p.102].
This causes the appearance of such a tool of accounting system as accounting policy.
Accounting policy is a form of activity in the field of accounting aiming at implementation of personal interests.
According to the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”, accounting policy is a set of principles, methods and procedures used by the company for preparation and presentation of financial reporting.
Which means this is the company’s choice of specific methods, forms and techniques of accounting based on the provisions of the applicable regulations and characteristics of company’s activity.
According to the Law on Accounting , on the one hand, the strict rules of organization and accounting are establishes, on the other hand, the companies get the opportunity to individually make decisions about accounting policy taking into consideration the characteristics of their own business activity, guided by the basic principles of accounting and financial reporting.
The accounting policy of the business entity is formed on the base of the national GAAP. Providing users with information about the accounting policy that the company is obliged to use all the time, is an important requirement of the principle of consistency. Principles and methods that form the company’s accounting policy are set by the norms of Art. 23 of GAAP 1 “General Requirements for Financial Reporting” .
Accounting policy should be developed by every company registered as required by law.
Causes of emergence of accounting policy in market conditions are the following [3, p.32]:
– alternatives for the organization and keeping the accounting stipulated by legislative documents;
– extension of activities and legal forms of business entities;
– change of the role of accountant in the economic life of the company from the simple registrar of business transactions to it’s active participant.
As an element of regulatory accounting system, accounting policy combines government regulation and certain independence of businesses concerning accounting issues.
The accounting policy as a specific element of the accounting system should provide organizational and methodological support to accounting tasks performing.
Respectively, it demands from the owners to focus on accounting system in general and in particular on the company’s accounting policy, through which they implement their own policy in the field of accounting. Thus, the formation and implementation of accounting policy is a tool that allows the owners to organize accounting in such a manner so that it would best meet their needs for information for property management.
The accounting policy includes following components: organizational, methodological and technical. Each component of the accounting policy of the company combines relevant objects for which there are alternatives – elements (Fig. 1) [3, p.15].
The object of accounting policy is any rule or position of the company and accounting system for which the alternatives are provided. The elements of accounting policy of the company are the methodological techniques and methods that are selected from among the conventional ones in view of features of the company activity.
Methodological techniques and methods of accounting process provide the choice of specific application of elements of the accounting method, which consists of the following elements: inventory and documentation, assessment and costing, accounts and double entry, balance and reporting [4, p.26].
The task of accounting policy is to ensure obtaining reliable information about the financial condition of the company, the results of it’s activity that is necessary for all the users of financial reporting for decision making.
Accounting policy becomes particularly important for large-sized companies with significant revenues and intensity of accounting information received by the management required for company operation.
The latter requires detailed information, which is not limited to information contained in financial reporting. To meet the domestic needs and to provide the company’s owner, management, investors with additional information, there may be a need for construction of analytical accounting and internal reporting forms in such a way that the company management on the basis of accounting data would be provided.
Depending on the ranging of accounting policy, different problems concerning the activity of business entity are solved with its help (Table 1) [4, p.45].
The tasks of accounting policy
|Ranging of accounting policy||Task of accounting policy|
|Social||Creating social guarantees for the protection of external users by ensuring the unity of interpretation of accounting data and indicators of financial reporting|
|Economic||Getting the effect of the use of rational accounting policy, i.e the best provision of information on management needs, reducing the volume of document circulation, improving the efficiency of internal control|
|Behavioral||Using the discretion concerning accounting issues for the creation of an effective accounting system in the company, which will ensure meeting the interests of the owner|
|Psychological||With the help of accounting policy elements and subject to the specification of requirements to the nature of necessary data the most complete and effective provision of information of all the levels of management is achieved|
|Informational||Sustainability of accounting policy and its disclosure in financial reporting allows to predict the future of the object|
|Legal||Using documents on accounting policy in order to eliminate uncertainties in the regulations on accounting and as written evidence in solving commercial disputes, conflicts with tax authorities|
Creating a system of internal documentation that would provide coverage and documentation of all selected elements of accounting policy for each object, is the final stage of formation of accounting policy. The accounting policy of the company is formed by a system of internal documentation on various areas of accounting work. Its content is partially revealed in the statutes of the company that lay the bases of the whole economic and administrative system of the company (Table 2) [5, p.90].
The documentation of accounting policy of the company
|Group of documents||Contents and characteristics|
|Internal organizational and administrative documents||Internal policies, rules, provisions, regulations, decisions of the owners etc. The choice of certain type of document depends on internal type of regulations of the company and the nature of the accounting policy issue|
|Basic reports on accounting process||Schedule of document circulation, work projects for automated accounting, job descriptions|
|Constituent documents (charter, constitutive agreement)||Form the bases of all business and administrative system of the company. Along with the definition of the subject of business entity activity, its status, manner of functioning, the constituent documents reflect a number of accounting issues (duration of the accounting period, the procedure for consideration and approval of annual financial reports, the procedure for audit reporting etc.)|
The main internal normative document that regulates the organization and accounting in the company, is the administrative document containing selected elements of accounting policy. It is advisable to use Regulation on accounting policy as such administrative document. Regulation is a legal document that establishes the organizational rules of the company and its business units, and is composed mainly in the process of creation of new companies. Regulation on accounting policy is one of the first documents used by the tax inspection, audit firms and other supervisory bodies during the audit of the company.
The accounting policy of the company should provide the following features [6, p.35]:
completeness of all the facts of economic activity reflected in the financial reporting;
readiness for accounting of expenses and liabilities rather than of potential profits and assets, which does not allow the creation of hidden reserves;
reflection of the facts and business activity conditions in the accounting, based not only on their legal form, but also on their economic importance;
identity of analytical account data with the balances and turnover at the accounts of synthetic accounting on the first day of each month, as well as of indicators of financial reporting with synthetic and analytical accounting data;
sound accounting, based on the business activity conditions and the size of the company.
Therefore, it is advisable to develop accounting policy not only to influence the accounting system, but also to adapt it to the needs of management.
Conclusions. It is necessary and important to reconceptualize the role of accounting policy as a tool for accounting organization and financial reporting. Effectually, preliminary deeply analyzed combination of possible options of accounting policy allows the company to efficiently carry out economic activity. Formation of accounting policy is a difficult process that requires organizational, technical, personnel capabilities; it does not end after the approval of the order on accounting policy, but continues until the termination of the company.
- On Accounting and Financial Reporting in Ukraine: Act of Ukraine No 996- XIV [electronic resource]. – Access: http://zakon2.rada.gov.ua
- Accounting Regulation (Standard) 1 “General requirements for financial reporting» No 87 [electronic resource]. – Access: http://zakon I.rada.gov.ua/laws/show/z0391-99
- Pushkar M.S. Theory and practice of accounting policy formation: [monograph] / Pushkar M.S., Shchyrba M.T. – Ternopil: Carte blanche, 2013. – 260 p.
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- Baranovska T.V. Accounting policy of the company in Ukraine: theory and practice: [textbook] / Baranovska T.V. – K: Knowledge, 2015. – 85 p.
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