A new standard for document management – another step towards localization?

From 01.01.2022, a new federal accounting standard – FAS 27/2021 “Documents and document flow in accounting” – will come into force. Previously, there was no separate regulatory act to manage document flow. The requirements for it were written in other legislative documents.

On many issues the act does not introduce global changes, but we would like to draw your attention to one important nuance which could seriously affect the company’s approach to accounting and processes.

Briefly about the changes

There is a conceptually new requirement that accounting documents as well as programs in which accounting records are kept must be hosted in the Russian Federation. Please note that this requirement comes into force in 2024, two years later than the other requirements of the standard.

The text of the document was changed several times during its approval; the notions of “collecting and processing… accounting documents” were excluded from the original wording. Thus, it can be assumed that the legislators’ plans to transfer the entire document management cycle to the territory of the RF have changed and now only the condition of storage of accounting data and documents is required.

There is also no requirement in the document that the collection and entry of information must be primarily carried out in the RF. This provides an understanding of how companies with accounting systems located abroad should change the process to comply with the Russian law.

The following are other novelties of this document that should be considered:

• Electronic documents can be signed with any electronic signatures, unless additional requirements are established by law (e.g., there are separate requirements for signing VAT-invoices).

• It has been established that when correcting paper documents, adjustments are allowed, but when correcting an electronic document, a new document must be drawn up.

• In addition to primary documents, a new category of documents has been established – covering documents. This is any document containing information about a fact of economic life.

Examples: an agreement with a counterparty, a court or the Federal Tax Service’s decision. On the basis of covering documents, information can be entered into accounting systems, if they contain the mandatory details of primary documents.

Who is affected by the changes

The new standard applies to legal entities obliged to keep accounting records. This applies to companies established under the Russian law, as well as branches and representative offices of foreign companies which have decided to keep accounting records in accordance with the Russian standards.

What they mean for business

Many companies that keep accounting records in such systems as SAP, Oracle and others are potentially unable to meet the data storing requirement without rebuilding the information infrastructure and localizing their databases in Russia.

The requirement to store accounting data in Russia gives additional reason to think about localizing accounting record keeping using 1C, SAP, Microsoft and other solutions that meet local requirements. This will make it possible not only to meet the requirements of the new standard, but also to solve many more global problems faced by the finance department when working in foreign systems.

For example, such a solution makes it possible to forget about frequent updates of mandatory reporting templates, and also to keep accounting records in the detail required for the correct preparation of tax reports. Such solutions can be fully integrated with global systems to ensure transparency and compliance with both international and local business requirements.

Integration solutions typically require good planning and implementation time, so it is important to consider the issue carefully and assess the risks that can be avoided by using such a solution.

Consequences of non-compliance with the standard

There are currently no comments on the penalties for breaches of document storing requirements in Russia, but there are two most likely grounds for prosecution:
• A gross violation of the accounting rules. In this case, there are fines from RUB 5,000 to RUB 10,000 for officials (usually the chief accountant, as the person responsible for accounting records, or the General Director).
• Failure on the part of a company to comply with document storing procedures. This violation is punishable by a fine from RUB 2,500 to RUB 5,000 for officials; and from RUB 200,000 to RUB 300,000 for legal entities.