NATIONAL ACCOUNTING STANDARD

“RECEIVABLES AND FINANCIAL INVESTMENTS”

Introduction

1. This standard is developed based on the EU Directives, Conceptual Framework for

Financial Reporting, IAS 19 “Employee Benefits”, IAS 32 “Financial Instruments:

Presentation”, IFRS 7 “Financial Instruments: Disclosures”, IAS 39 “Financial Instruments:

Recognition and Measurement”.

Objective

2. The objective of this standard is to establish how to account for receivables, financial

investments and disclosure of the related information in financial statements.

Scope

3. This standard shall apply to all receivables and financial investments, except:

1) investments in associates and joint ventures (IAS 28 “Investments in Associates and

Joint Ventures”), investments held by organizations with risk capital, investment funds and other

similar entities (IFRS 7 “Financial instruments: disclosures”);

2) post-employment benefits plans (IAS 19 “Employee benefits”);

3) insurance contracts (IFRS 4 “Insurance contracts”);

4) derivatives (IAS 32 “Financial instruments: presentation”, IAS “Financial Instruments:

Recognition and Measurement”.

Definitions

4. This standard uses the following terms with the meanings specified:

Receivables – rights of the entity arising from past transactions or events and as a result of

which extinction, the inputs (increase) of resources embodying economic benefits are expected.

Financial investments – assets in the form of securities, shares of participation in the share

capital of other entities and other investments held by the entity in order to exercise control, to

obtain income or other economic benefits.

Securities market – a component part of the financial market, where the securities issuance

and circulation takes place.

Fair value – amount for which an asset could be exchanged, or a liability settled, between

knowledgeable, willing parties in an arm’s length transaction.

Carrying value – value for which receivables and financial investments are recognized in

the financial statements.

General Rules

5. Receivables and financial investments shall be recognized as assets according to the

accrual based accounting when:

1) there is a justified certainty that as a result of settlement of receivables or holding

investments, the entity will obtain future economic benefits;

2) the value of receivables and financial investments can be assessed reliably.

6. Differences of foreign currency exchange rate and amount related to the receivables and

financial investments shall be accounted for according to the provisions of NAS “Differences of

foreign exchange rate and amount”.

7. Receivables and financial investments shall be classified based on the following criteria:

1) economic content;

2) degree of affiliation of the parties;

3) terms of payment and ownership.

8. As per the economic content, receivables and financial investments shall be classified

under para 16 and 54 of this standard.

9. Based on the degree of parties affiliation, receivables and financial investments shall be

divided into receivables and financial investments related to the affiliated and unaffiliated

parties. Composition of the related parties is set out in NAS “Related parties and civil society

contract”.

10. Depending on the terms of payment and ownership, receivables and financial

investments shall be divided into current and long term. Receivables and financial investments

shall be considered current if the time of payment (probable ownership) does not exceed 12

months from the reporting date. In other cases, receivables and financial investments shall be

treated as long-term receivables and financial investments.

11. As of the reporting date, the entity shall determine the current share of long-term

receivables and financial investments, which shall be recorded as an increase in current

receivables and financial investments and a decrease in the long-term receivables and financial

investments.

Accounting for receivables

12. On initial recognition, receivables shall be valued at nominal value, including taxes and

fees calculated in accordance with the law (e.g., VAT, excise and other taxes and fees).

13. Derecognition of receivables may be done by their settlement (e.g., collection of cash,

crediting (settlement) advances received, liabilities compensation).

14. The settlement of receivables shall be accounted for as an increase in cash, costs,

expenses or reduction in liabilities and receivables.

15. Receivables shall be reflected in the financial statements at the carrying amount. If, on

the reporting date, the amount of funds received from the settlement of receivables exceeds their

recognized value, the difference shall be recorded as liabilities.

16. Receivables shall be accounted for in the following groups:

1) Trade receivables;

2) advances provided;

3) Receivables of the budget;

4) Receivables of the personnel;

5) Other receivables.

Trade receivables and advances provided

17. Trade receivables shall comprise the receivables on goods sold, services provided and

work performed.

18. Trade receivables shall be accounted for every delivery of goods, provision of services

and execution of work as a concomitant increase in receivables and revenues through current

liabilities.

Example 1. On 15 October 201X, an entity has delivered 100 product units with

subsequent payment at a price of 500 MDL/unit (without VAT). The VAT rate is 20%.

Based on the example data, in October 201X, the entity accounts:

- The value of goods delivered amounting to MDL 50,000 (100 units × MDL 500) - as a

simultaneous increase in trade receivables and current revenues;

- VAT on the supply in the amount of MDL 10,000 (MDL 50,000 x 20%) - as a

concomitant increase in trade receivables and current liabilities. [Para 18 amended through Order of the Ministry of Finance no.166 of 28.11.2013, in force since

01.01.2014]

19. Within the intermediary operations (under the contract of mandate, commission, etc.),

the trade receivables shall be accounted for at the total amount as a concomitant increase in

receivables and liabilities excluding commission.

20. If the promissory notes were accepted, the trade receivables shall include:

1) receivables on goods delivered, services rendered, work performed that shall be

accounted for in the manner set out in para 18 of this standard;

2) receivables on interest that shall be accounted for as an increase in current receivables

and revenues.

Example 2. In November 201X, an entity has delivered 200 product units at the price of

300 MDL/unit (without VAT). The amount of VAT on delivery is MDL 12,000 [(MDL 300 × 200

units) × 20%]. In December 201X, the entity has accepted a promissory note issued by the buyer

to pay for products delivered with a maturity of five months and 10% annual interest. The

interest is calculated monthly from the total amount of receivables.

Based on the example data, the entity accounts:

In November 201X:

- The value of delivered products worth MDL 60,000 – as a concomitant increase in trade

receivables and current revenue;

- VAT on delivery worth MDL 12,000 – as a concomitant increase in trade receivables and

current liabilities;

In December 201X:

- promissory note issued by the buyer in the amount of MDL 72,000 (MDL 60,000 + MDL

12,000) - as internal correspondence within the trade receivables;

- Monthly interest amounting to MDL 600 [(MDL 72,000 × 10%): 12 months] - as a

concomitant increase in trade receivables and current revenues.

21. Adjustment of the initially recognized trade receivables shall be accounted for if:

1) granting price reductions after the sale of goods / services;

2) granting bonuses for meeting contractual conditions;

3) returning the goods sold;

4) correction of errors etc.

22. Adjustment of trade receivables, excluding correction of errors, shall be accounted for:

1) if the initial recognition and adjustment of receivables (excluding VAT) occur in the

same reporting period – as a reversal of current receivables and revenue;

2) if the initial recognition and adjustment of the receivables (excluding VAT) occur in

various reporting periods – as an increase of expenses (losses) or decrease in provisions and

current receivables;

3) regardless of the reporting period when the initial recognition and adjustment of

receivables took place – as cancellation of receivables and current liabilities to the amount of

VAT related to the receivables.

Example 3. In December 201X, an entity sold 20,000 kg of products at a price of 12

MDL/kg, including VAT - 20%, the cost of which was 8 MDL/kg. Upon receipt the purchaser

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found 5000 kg of low quality products, a complaint being addressed to the seller. After

recognition of the claims by the seller, the low quality products were returned:

option I – in December 201X;

option II – in January 201X +1.

The settlement of receivables was conducted in May 201X +1.

Based on the example data, the entity-seller accounts for:

option I:

In December 201X:

- The value of goods sold in the amount of MDL 200,000 (20,000 kg × 10 MDL) - as a

simultaneous increase in trade receivables and current revenues;

- VAT on sale in the amount of MDL 40,000 (MDL 200,000 x 20%) - as a concomitant

increase in trade receivables and current liabilities;

- The value of sales (excluding VAT) of returned products worth MDL 50,000 (5,000 kg ×

10 MDL) - the reversal of trade receivables and current revenue;

- VAT on the value of returned products amounting to MDL 10,000 (MDL 50,000 x 20%)

- the reversal of the trade receivables and current liabilities;

in May 201X +1:

- settlement of trade receivables amounting to MDL 180,000 [(MDL 200,000 + MDL

40,000) - (MDL 50,000 + MDL 10,000)] – as an increase in cash and decrease in trade

receivables.

Option II:

In December 201X:

- The value of goods sold in the amount of MDL 200,000 (20,000 kg × MDL 10) - as a

simultaneous increase in trade receivables and current revenues;

- VAT on sale in the amount of MDL 40,000 (MDL 200,000 x 20%) - as a concomitant

increase in trade receivables and current liabilities;

In January 201X +1:

- The difference between the sale value and the cost of returned items worth MDL 10,000

[5,000 kg × (10 MDL - 8 MDL)] – as an increase in current expenses and decrease in trade

receivables;

- VAT on the value of returned products amounting to MDL 10,000 (MDL 50,000 x 20%)

- the reversal of the trade receivables and current liabilities;

- Cost of products returned by the buyer in the amount of MDL 40,000 (5,000 kg × MDL

8) – as an increase in inventories and decrease in trade receivables;

in May 201X +1:

- settlement of trade receivables amounting to MDL 180,000 [(MDL 200,000 + MDL

40,000) - (MDL 10,000 + MDL 10,000 + MDL 40,000)] – as an increase in cash and decrease in

trade receivables.

23. Correction of errors from previous years shall be accounted for as a concomitant

decrease (increase) in corrections of financial results of the previous years and current

receivables.

24. Advances granted are payments made against subsequent purchase of goods, services,

and works and shall be accounted for as an increase in current receivables and decrease of cash.

25. Settlement of advances provided and unused shall be accounted for as an increase in

cash and decrease in receivables.

26. Refund of provided or unused advances shall be accounted for as an increase in cash

and reduction of receivables.

Budget Receivables

27. Budget receivables shall include taxes and fees paid in advance/installments, amounts

paid in addition to the budget, the difference between the VAT amount credited to the account

and calculated, the amount of VAT on advances received, indirect taxes for refund, other

receivables of the budget in accordance with the legislation in force.

28. Receivables of the budget shall be recorded as an increase in receivables and decrease

in cash or increase in current liabilities.

Example 4. In accordance with the accounting policy, the entity pays the income tax

quarterly in installments based on the method of payment in installments for the tax that was to

be paid for the previous year. In 201X-1, the income tax calculated and declared was of MDL

100,000. In March 201X, the entity paid in advance MDL 25,000 (the installment for the first

quarter - MDL 100,000: 4 quarters), the other three quarterly installments have been paid within

the time provided by law. The actual income tax for 201X is of MDL 118,000.

Based on the example data, the entity accounts:

In quarters I - IV of 201X:

- Income tax paid in installments amounting to MDL 100,000 (MDL 25,000 × 4 quarters) –

as an increase in current receivables and decrease of cash;

As of 31 December 201X:

- The actual value of income tax in the amount of MDL 118,000 – as a concomitant

increase in expenses (related to income tax) and current liabilities;

- settlement of the income tax paid in installments in the amount of MDL 100,000 – as a

concomitant reduction of current liabilities and receivables.

Receivables of the personnel

29. Receivables of the personnel shall include: advances for salary, the amounts granted to

holders of advances, receivables on the recovery of material prejudice and other receivables of

the personnel.

30. Receivables of the personnel on salary advances shall occur as a result of advance

payment of salary and shall be accounted for as an increase in the receivables of the personnel

and decrease of cash.

31. Receivables on the amounts granted to holders of advances shall be accounted for as an

increase in receivables of the personnel and decrease in cash.

32. Receivables of the personnel related to the material injury recovery shall be recorded as

a concomitant increase in receivables and current revenues or liabilities. In accordance with the

accounting policies, taking into account the materiality of pecuniary damage to be recovered in

the future periods may be recorded as revenue anticipated with the subsequent settlement of

current revenue.

Other receivables

33. Other receivables include: receivables on recovery of losses, receivables on claims

submitted and recognized, receivables of the social and health insurance bodies etc.

34. Receivables on recovery of losses shall comprise the damages to be paid by insurance

companies, the rewards calculated and recognized by the state bodies, rewards recognized by

other entities/individuals or established by court decisions. These accounted receivables shall be

accounted for as a concomitant increase in current receivables and revenue.

35. Receivables on complaints submitted and recognized shall comprise the complaints

calculated, recognized and paid by the state bodies and other entities and shall be accounted for

as concomitant increase in current receivables and revenue.

Example 5. In November 201X, entity "A" filed a complaint (on penalties calculated in

accordance with contractual terms) in the amount of MDL 8,000 with entity "B" that did not

recognize the claim. In May 201X, entity “A” won the court decision on the partial satisfaction

of submitted complaint with the amount of MDL 5,000, which was received in June 201X +1.

Based on the example data, entity "A" accounts:

In November 201X:

- Complaint lodged and unrecognized worth MDL 8,000 - off-balance sheet account;

in May 201X +1:

- receivables on complaints submitted and recognized in the amount of MDL 5,000 – as a

concomitant increase in current receivables and revenue;

- settlement of claim in the amount of MDL 8,000 from the off-balance sheet account;

In June 201X +1:

- settlement of the receivables on complaints totaling MDL 5,000 – as an increase in cash

and decrease in current receivables.

Compromised receivables

36. Receivables are considered compromised in cases where the limitation period provided

by law has expired or the buyer (customer) is in an unfavorable financial situation (receivables

do not have guaranteed coverage and cannot be collected). Recognition of receivables as

compromised shall occur based on documents confirming the occurrence of the respective

circumstance.

37. According to accounting policies, compromised receivables can be accounted for by

applying:

1) the direct method, or

2) provisions (corrections) method.

38. When applying the direct method, compromised receivables shall be settled to the

current expenditures during the reporting period when these were recognized as compromised.

Compromised receivables settlement shall be recorded as an increase in current expenses and

decrease in current receivables.

Example 6. In December 201X, after an inventory, an entity has detected receivables with

expired limitation period amounting to MDL 36,000. The entity is not registered as VAT payer

and it does not set corrections on compromised receivables. According to the results of the

inventory, the entity’s manager has decided to settle receivables with expired limitation period.

Based on the example data, in December 201X, the entity accounts compromised

receivables settlement in the amount of MDL 36,000 as an increase in current expenses and

decrease in current receivables.

39. Restoring compromised receivables previously settled in current expenditures shall be

accounted for as a concomitant increase in current receivables and revenue and current liabilities.

40. The method of provisions (corrections) can be applied for adjusting the trade

receivables. Corrections are set at the extent of sale of goods or services within the time limits of

accounting policies (monthly, quarterly, annually) and shall be accounted for as a concomitant

increase in current expenses and corrections on compromised receivables.

41. The size of the corrections on compromised receivables can be determined:

1) to each claim based on the sheer size of receivables compromised;

2) per groups of receivables according to their deadline for payment expired;

3) for all receivables entirely based on net sales volume during the reporting period and the

share losses on compromised receivables;

4) as otherwise provided in accounting policies.

42. In order to determine the size of provisions (corrections) per claim considering, the

creditworthiness of each borrower shall be analyzed and possibility to fulfill integrally or

partially its financial obligations.

Example 7. On 20 May201X, an entity sold to a buyer products worth MDL 30,000. The

term of payment under the contract - 20 June 201X. The receivables were not paid in due time by

reason of the insolvency of the buyer.

Based on the example data, on the reporting date, the entity accounts the establishment of

provision amounting to MDL 30,000 as a concomitant increase in current expenditures and

corrections on compromised receivables.

43. In order to determine the size of corrections per receivables groups, their classification

as per their expired payment deadline and establishment of the compromised receivables share

per each group. The share of compromised receivables shall be calculated based on data from

analytical accounts of previous periods (e.g., 3-5 years). The size of corrections shall be

determined by applying the share of compromised receivables to the balance of each group of

receivables.

Example 8. An entity has the following data on trade receivables grouped by payment

deadline expired.

Table 1

Receivables as of 31.12.201X

(determination of groups)

Purchaser Balance of

trade

receivables,

MDL

Expired deadline for payment

1 – 30

days

31 – 60

days

61 – 90

days

91 –

120

days

over

120

days

“A” 36,000 36,000

“B” 90,000 90,000

“С” 240,000 154,000 86,000

“D” 52,000 52,000

Other purchasers 784,000 360,000 278,000 80,000 40,000 26,000

Total 1,202,000 514,000 400,000 170,000 92,000 26,000

Share of compromises receivables,

%

x 1 3 10 30 50

Based on the data in Table 1, the corrections on compromised receivables shall be

determined.

Table 2

Compromised receivables as of 31.12.201X

(determination of corrections on compromised receivables)

Expired deadline for payment Balance of

trade

receivables,

MDL

Share of

compromised

receivables,

%

Corrections

on

compromised

receivables,

MDL

A 1 2 3 = 1 × 2 : 100

1 – 30 days 514,000 1 5,140

31 – 60 days 400,000 3 12,000

61 – 90 days 170,000 10 17,000

91 – 120 days 92,000 30 27,600

Over 120 days 26,000 50 13,000

Total 1,102,000 x 74,740

Based on the example data, the size of corrections on compromised receivables amounting

to MDL 74,740 is recorded as concomitant increase in current expenditures and corrections on

compromised receivables.

44. Corrections on compromised receivables determined in accordance with the provisions

of para 42-43 in this Standard, shall be adjusted with the differences between the size of the

calculated corrections and their unused balance according to accounting data.

Example 9. An entity has the following analytical data on receivables for the year 201X

(table 3). In accordance with the accounting policies, the corrections on compromised

receivables shall be determined based on the absolute value of compromised receivables. As of 1

January 201X, the unused balance of the compromised receivables corrections is of MDL

125,900.

Table 3

Receivables as of 31.12 201X

Purchaser Balance of trade

receivables, MDL

Balance of

compromised

receivables, MDL

“A” 450,000 37,500

“B” 320,000 56,000

“С” 200,000 200,000

Total 970,000 293,500

Based on the example data, corrections on compromised receivables calculated (MDL

293,500) shall be adjusted and accounted for in the amount of MDL 167,600 (MDL 293,500 -

MDL 125,900) as a concomitant increase in current expenditures and corrections on

compromised receivables.

45. The size of corrections on receivables entirely shall be determined by multiplying the

average rate of compromised receivables and volume of net sales. The volume of net sales shall

represent the proceeds from sales on credit (post-pay) adjusted to the value of the goods returned

and/or the amount of the discount related to the sale. Average share of compromised receivables

shall be calculated as the ratio of the actual amount of losses on compromised receivables during

the previous administration (e.g., 3-5 years) and volume of net sales in the same period.

Example 10. In 201X, the sales volume of an entity amounted to MDL 2.81 million and the

value of returned goods - 50000 MDL. The size of corrections on compromised receivables is

determined at the end of the year based on the data on net sales volume and losses on

compromised receivables for 3 previous years.

Table 4

Net sales volume and losses on compromised receivables

Years Volume of

net sales,

MDL

Losses related to the

compromised receivables,

MDL

201X–3 2,250,000 85,000

201X–2 2,520,000 72,000

201X–1 3,050,000 92,000

Total 7,820,000 249,000

According to the example data, the average rate of compromised receivables is 3.18%

(MDL 249,000: MDL 7.82 million × 100%). Corrections on compromised receivables - MDL

87,768 [(MDL 2.81 million - MDL 50,000) × 3.18%], on 31 December 201X, shall be accounted

for as a concomitant increase in current expenses and corrections on compromised receivables.

46. When applying the corrections method, the settlement of compromised receivables

shall be accounted for as a concomitant reduction in compromised receivables and corrections on

trade receivables. If the amount of set corrections is less than the settled amount, the difference

shall be accounted for as a concomitant increase in current expenditures and corrections on

compromised receivables.

47. Restoring receivables previously settled as compromised receivables due to corrections

shall be accounted for as a concomitant increase in the receivables and corrections on

compromised receivables.

48. The size of the corrections on compromised receivables shall be adjusted when

determining the carrying amount of trade receivables.

49. In case of transition from corrections method to the direct/straight method of

accounting for compromised receivables, the balance of corrections shall be settled by

decreasing the corrections on compromised receivables and increasing the current revenue.

Accounting for financial investments

50. Financial investments shall be initially assessed at the cost of entry, which composition

varies depending on the type and mode of entry of investments.

51. Dividends and interests calculated for financial investments shall be recognized as

revenue and shall be accounted for in accordance with NAS “Revenues”.

52. Financial investments servicing costs (e.g., commissions, brokerage services and other

service costs) shall be accounted for as an increase in current expenses and decrease in cash,

receivables and increase in current liabilities.

53. Reclassification of financial investments must be made as needed, taking into account

the likely timescales for holding investments, payment terms and other factors.

54. Financial investments shall be accounted for under the following groups:

1) securities and equity participation;

2) Other financial investments.

Securities and equity participation

55. Securities are securities certifying the property right of the holder or the right of the

lender - holder of a document to the issuer thereof.

56. Securities include:

1) shares - capital document in the form of certificates or registrations on personal account

confirming its owners (shareholders) right to participate in the management of the joint stock

company, to receive dividends, as well as a part of its corporate assets in case of liquidation;

2) bonds - securities receivables, which gives the holders (bondholders) the right to receive

the nominal value of bonds within the set timeline and revenue as interest in respect thereof;

3) other securities - securities receivables as:

a) treasury bills, which are government securities issued at a discount and redeemed at face

value, with a maturity up to one year;

b) bank certificate confirming the right of holders to receive, at the time-limit, cash

deposited and a certain interest.

57. The initial cost of the securities shall include the purchase price (or the fair value of

other forms of compensation provided) and procurement related costs (e.g., commissions and

fees paid to consultants, brokers and dealers, duties provided by law, other transactional costs).

58. The initial cost of securities shall be accounted for as an increase in financial

investments and decrease in cash, current receivables, non-callable and unregistered capital

and/or increase in liabilities, current revenue.

Example 11. An entity, through a broker company, purchased 300 shares at a price of 80

MDL / share, with the face value of 75 MDL / share. The costs of purchasing the shares were

MDL 1,800.

At the time of initiating the transaction for the purchase of shares and payment of the

brokerage services, the entity has transferred cash in the amount of MDL 25,800 to the brokers

company.

Based on the example data, the entity accounts:

- Payment of cash for transactions with securities amounting to MDL 25,800 – as an

increase in current receivables and decrease of cash;

- Value of the shares at the purchase price amounting to MDL 24,000 (300 shares × 80

MDL / share) – as an increase in financial investments and decrease in the current receivables;

- Costs of purchase of shares worth MDL 1,800 – as an increase in financial investments

and decrease in current receivables.

59. The initial cost of securities in the form of bonds (except those listed in the financial

market) shall be adjusted if the initial cost does not match their nominal value (the value declared

to be paid at maturity).

60. The difference between the initial cost and the nominal value of the bonds shall be

depreciated based on the linear method as the interest is calculated or otherwise set out in

accounting policy and shall be accounted for as follows:

1) for the securities with a discount (purchased at a price lower than the nominal value) - as

a concomitant increase in financial investments and current revenue;

2) for securities with premium (purchased at a price greater than face value) – as an

increase in current expenses and decrease in financial investments.

Example 12. On 1 June 201X, through a licensed bank, an entity bought 300 bonds at a

discount price of 95 MDL / bond. Face value - 100 MDL / bond and fixed annual interest - 10%.

Brokerage services provided by the bank amounted for MDL 342. Term for holding bonds - 5

years. Interest is paid 2 times per year: on 30 June and 31 December.

According to the accounting policies, the difference between the cost of entry and the

nominal value shall be settled simultaneously with the calculation of interests.

Based on the example data, the entity accounts:

In June 201X:

- The value of bonds at purchase price in the amount of MDL 28,500 (MDL 300 × 95

bonds) – as an increase in the financial investments and decrease in cash;

- Brokerage services paid in the amount of MDL 342- as an increase in financial

investments and decrease in cash;

In December 201X:

- Half-yearly interest amounted to MDL 1,500 [(300 bonds × 100 MDL) × 0.1: 2

semesters] – as a concomitant increase in current receivables and revenue;

- The difference between the cost of entry and the nominal value of bond for the period of

interest calculation amounting to MDL 115.80 [(300 bonds × 100 MDL) - (300 bonds × MDL 95

+ MDL 342): 5 years: 2 semesters] – as a concurrent increase in financial investments and

current revenue.

61. If the entry cost of the bonds includes the interest calculated and unpaid, the amount of

interest for the period up to the purchase of bonds shall decrease their cost of entry. Interest for

the period after the purchase of bonds shall be accounted for in accordance with the NAS

“Revenues”.

62. At the reporting date, the securities shall be evaluated:

1) at the initial/entry cost - securities unlisted on the financial market where the initial cost

was not significantly changed during the reporting period;

2) at the adjusted cost - in the form of bond securities whose initial cost is different from

their nominal value;

3) at fair value - securities quoted on the financial market.

63. Difference between the initial cost (or book value at beginning of the period) and the

fair value of listed securities in the financial market shall be accounted for as follows:

1) in case of reduction in the carrying amount – as an increase in current expenditures and

decrease in financial investments;

2) in case of an increase in the book value – as a concomitant increase in financial

investments and current revenue.

Example 13. Initial cost of the shares purchased by an entity is MDL 34,500 (345 shares ×

100 MDL / share). As of 31 December 201X, the price at the exchange market of the shares was:

- Option I - 95 MDL / share;

- Option II - 107 MDL / share.

Based on the example data, on 31.12.201X, the entity shall account for the difference

between the initial cost and the fair value of the shares:

option I: the sum of MDL 1,725 [(MDL 95 - MDL 100) x 345 shares] – as an increase in

current expenses and decrease in financial investments;

option II amount of MDL 2,415 [(MDL 107 - MDL 100) x 345 shares] – as a concomitant

increase in financial investments and current revenue.

64. At each reporting date, the entity shall determine whether or not there is any basis for

depreciation of securities, except for those measured at fair value. As criteria for depreciation

may serve:

1) significant financial difficulty of the securities issuer;

2) disappearance of financial market for the respective securities;

3) failure by the issuer to comply with the contractual clauses regarding the payment of

dividends and interest; or

4) other relevant information available to the entity.

65. If the depreciation of securities is to be necessary, these shall be assessed at fair value

less probable selling costs. If the carrying amount of the securities exceeds the fair value less

probable selling costs, the entity shall recognize an impairment loss.

66. Impairment losses on securities shall be recorded as an increase in current expenses and

decrease in financial investments.

67. Where the grounds for impairment of securities lose their relevance (e.g., improved

financial situation of the issuer or the bondholder, the respective financial market exists) the

impairment losses recognized shall be reversed and accounted for as a concomitant increase in

financial investments and current revenue.

68. Disposal of securities occurs after the sale, writing-off, free of charge transmission etc.

and shall be settled at book value which is determined for each particular title or group of

securities of the same issuer. The securities having the same issuer and registered in accounting

at different input dates and costs, at the exit/output shall be assessed in accordance with the

accounting policies, as per the weighted average cost method or the FIFO (first in - first out)

method.

69. The carrying amount of outgoing securities accounted for as an increase in current

expenses and decrease in financial investments.

70. Revenues from disposal of securities accounted for as concomitant increase in cash,

receivables and current revenue.

71. The costs of securities output (e.g., consultancy services, fees paid to brokers) shall be

recorded as an increase in current expenses and decrease in cash, current receivables or increase

in current liabilities.

Example 14. An entity sold 100 bonds, which sale value is of MDL 30,000 and the

carrying amount – MDL 26,000. The costs of sale to be paid include consulting services in the

amount of MDL 350.

Based on the example data, the entity accounts:

- carrying amounts of bonds sold in the amount of MDL 26,000 – as an increase in current

expenditures and decrease in financial investments;

- sale value of bonds in the amount of MDL 30,000 – as a concomitant increase in current

receivables and revenue;

- costs related to the sale of bonds in the amount of MDL 350- as an increase in current

expenses and liabilities.

72. Participation shares are rights as equity shares or other interests held by the entity in the

authorized capital of other entities.

73. The size of the equity participation quotas shall be negotiated between associates and

shall be reflected in the constitutional documents of the entity in which the investor holds such

quotas.

74. Equity participation shall be presented in the financial statements at cost of entry.

75. Entry and exit of equity participation, as well as revenue from these equity

participations shall be accounted for in the manner set out in para 50, 51, 58, and 69-71 of this

standard.

Example 15. In January 201X, entity “A” provided MDL 18,000 as part of the share

capital of the entity “B”. In February 201X, entity “B” distributed profit of 201X, including to

entity “A” in the amount of MDL 3,000.

Based on the example data, the entity “A” accounts:

In January 201X:

- equity participation in Share capital of the entity “B” in the amount of MDL 18,000- as

an increase in financial investments and decrease of cash;

In February 201X +1:

- Revenue from equity participation worth MDL 3,000 – as a concomitant increase in

current receivables and revenue.

Other financial investments

76. Other financial investments include loans granted, bank deposits etc.

77. Loans granted are the funds provided by the entity in cash or in kind to other legal or

natural persons under loan agreements. Loans granted shall be accounted for as an increase in

financial investments and decrease in cash or other assets (in case of loans in kind).

78. Repayment of loans provided previously shall be accounted for as an increase in cash,

other current assets (in case of loans in kind) and decrease of financial investments.

Example 16. In January201X, an entity has granted a loan of MDL 50,000 for a period of

9 months with an interest rate of 15% annually. According to the contract, the interest is

calculated and paid at the end of each quarter.

Based on the example data, the entity accounts:

- Loan granted in the amount of MDL 50,000 – as an increase in current financial

investments and decrease in cash;

- Quarterly interest calculated in the amount of MDL 1,875 [(MDL 50,000 x 15%) 4] - as a

concomitant increase in current receivables and revenue;

- Quarterly interest received amounting to MDL 1,875 – as an increase in cash and

decrease in current receivables;

- Repaid loan in the amount of MDL 50,000 – as an increase in cash and decrease in

current financial investments.

79. Loans granted in kind shall be considered as financial investments if, at their expiry,

the legislation requirements are met (e.g., if the assets specified in the contract are not returned

or value of the assets to be returned is recovered in cash).

80. The bank deposits are cash deposits in financial institutions for a long-term (for a fixed

period of time) or short-term (without setting the date of entry) in order to obtain revenue in the

form of interest. Opening of bank deposits shall be accounted for as an increase in financial

investments and decrease of cash.

81. Closing bank deposits shall be accounted as an increase in cash and decrease of

financial investments.

Disclosure of information

82. The entity's financial statements shall present at least the following information:

1) receivables:

a) the carrying amount of each group of receivables at the beginning and end of the

reporting period;

b) current share of long-term receivables;

c) record-keeping method for compromised receivables;

d) value of compromised receivables registered and settled during the reporting period;

e) the size of provisions (corrections) on the compromised receivables at the beginning and

end of the reporting period;

2) Financial investments:

a) the carrying amount of each investment group at the beginning and end of the reporting

period;

b) the difference between the initial cost and the nominal value of the bonds settled to the

current expenses or revenue;

c) the difference between the initial cost (book value) and fair value of securities quoted on

the financial market, settled on the current expense or revenue;

d) size of investment revenue as interest, dividends, etc.;

e) current share of long- term financial investments;

f) the value of the financial investments reclassified from current financial investments to

long-term financial investments.

Transitional provisions

83. This standard shall be applied from the date of entry into force.

84. On the date of entry into force of this standard, the entity shall settle:

1) differences from revaluation of long-term financial investments (reduction and

assessment gap) – to the retained earnings (uncovered loss) of previous years;

2) increase/decrease in value of long term investments – to the long-term financial

investments;

3) reducing the value of current investments - Financial investments at current.

Date of entry into force

85. This standard enters into force on 1 January 2014. __________

Ministry of Finance Order no.118 of 06.08.2013 on approval of National Accounting Standards //Official Gazette no. 233-237/1534, 22.10.2013