Accounting models

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For both transactional and transformational models, financial information related to the NAS (National Accounting Standards) chart of accounts is translated to the financial information related to the IFRS chart of accounts. The processes of preparing the IFRS reporting differ for transformational and transactional models.

A comparison of the accounting models using the following criteria:

• Accounting information structure
• IFRS accounting
• Consolidation under IFRS
• Reporting preparation under IFRS

is provided in the table below.

Comparison criteria	IFRS transactional model	IFRS transformational model with accounting under NAS in current and external infobases (including non-1C ones)
	Accounting under NAS, current infobase	Accounting under NAS, external 1C infobases
Accounting information structure
Accounting register architecture	IFRS accounting register for IFRS analytical chart of accounts, with direct correspondence and double entry	IFRS accounting register for IFRS analytical chart of accounts, with direct correspondence and double entry	Indicators of specialized report types (analytical trial balances) for the IFRS analytical chart of account, with double entry, without direct correspondence
Converting accounting data to additional currencies	To the reporting currency at the rate as of the transaction date	To the reporting currency at the rate as of the transaction date	Converting with calculation of currency translation reserve in analytical trial balance for arbitrary quantity of currencies, based on periodic exchange rates (average rate for period, beginning of period, end of period, and more).
Quantitative accounting	Quantity for debit and credit in entries	Quantity for debit and credit in entries	No
NAS data import	Translation from NAS accounting register to IFRS accounting register, drilldown to accounting documents	Translation from NAS accounting register to IFRS accounting register, drilldown to accounting documents	Import from Microsoft Excel files or via ADO. For external 1C infobases, translation can be performed from accounting registers to reporting indicators with drilldown to the source documents
IFRS accounting
Manual adjustments (including reclassifications, accruals)	IFRS transaction	IFRS transaction	Transformational adjustment
Adjustments by templates	Yes	Yes	Yes
Parallel accounting (NCA, financial instruments, impaired receivables, RAS)	Yes	Yes	Yes
Pre-filling parallel accounting documents from NAS documents	Yes, auto-filling	Yes, from an input form	Yes, from an input form (auto-filling for the current infobase)
Closing accounts for inventory items, work in progress, NCA	Yes	Yes	Yes, only total amount for inventory items
Period-end closing transactions (deferred tax assets/liabilities, currency revaluation, financial result)	Yes	Yes	Yes
Posting of previous period adjustments	Not required	Not required	Yes
Quick closing (document translation, double closing, accrual mapping and reversal portal)	Yes	No	No
Elimination and consolidation
Intercompany reconciliation by entries, generation of intercompany counter documents	Yes, based on NAS and IFRS data	Yes, based on IFRS data only	No
Intercompany reconciliation by indicators	Yes	Yes	Yes
Elimination by entries with accurate undistributed profit calculation for inventory items and NCA based on the cost calculation algorithms	Yes	Yes	No
Elimination by indicators with undistributed profit calculation based on the standard method and the reported cost method	Yes	Yes	Yes
Simple elimination by analytical trial balance indicators, without undistributed profit calculation	Yes	Yes	Yes
Consolidation adjustments (goodwill, NCI)	Yes	Yes	Yes
Reporting
IFRS report designer	Yes	Yes	Yes
Accounting reports (trial balances, account cards, extra dimension analysis)	Yes	Yes	No

Now, let's discuss each IFRS accounting model in more detail.

• Transformational model

The process of preparing IFRS reporting differs for transformational and transactional models. With both accounting models, you can make automated transformational adjustments as a result of parallel accounting of specific transactions. Both models include a period-end closing procedure that does not depend on NAS. Parallel accounting and period-end closing are different for the transformational and transactional accounting models.

To run period-end closing in the transformational accounting model, start a closing transaction to repeat adjustments of previous periods in each reporting period. This transaction transfers manual and automatic adjustments made in report instances of previous periods to the current period.

The data entry method is different for parallel accounting in transformational and transactional models. All business transactions are transferred to IFRS in the transformational model. When posting parallel accounting documents, the transactions with parallel accounting are reversed.

Transactions in the transactional model for which parallel accounting in IFRS is provided are not translated. By setting up filters during the translation, these transactions are excluded. When posting parallel accounting documents, the corresponding transactions are not reversed.

• Preparing IFRS reporting under the transformational model
  1. Initial data for IFRS report preparation is imported into the system either directly from external accounting systems or from input forms filled in outside the system. The initial data for transformation is NAS data. You can subsequently adjust the data in the application using existing tools. You can also import IFRS data ready to be transferred for consolidation into the system immediately. In this approach, transformation is not required. 
     Initial data under the transformational model is transferred fully, without excluding certain business transactions. That is the difference between the transformational model and the transactional model, since transformation does not involve continuous accounting of business activity objects. So, the initial trial balance under NAS is taken as the basis (or reporting forms by NAS: balance sheet, profit and loss statement), which must be complete and correspond to the NAS data. When undergoing an audit and checking reporting during preparation, this approach allows you to quickly control if IFRS adjustments are recorded correctly. You can also make reporting verifiable and provide it with drilldowns, which are based on export from accounting systems under NAS. IFRS reporting can also be used for internal management purposes. You can prepare management reporting on its basis, owners can analyze IFRS reporting indicators used to make management decisions, and so on. Often you need to explain and drill down the differences in the assessments of indicators by IFRS and NAS, for example, net profit. In the application, you can always see the initial translated trial balance or reporting forms under NAS, on whose basis the IFRS reporting was prepared, and view the IFRS adjustments. To do this, use the Transformation worksheet data processor on the IFRS accounting panel.
  2. IFRS adjustments are applied to the source data translated from NAS using the application tools. Some adjustments are reclassification of NAS data within accounts of assets/liabilities, income/expenses without changing NAS evaluations. For example, conversion of short-term accounts receivable to long-term. These adjustments are called reclassifications. You can make them manually after translation using the Transformational adjustment document. You can avoid some manual reclassifications by setting up translation rules (for example, translate one source account to several destination accounts).
      Besides reclassifications, there are adjustments that affect the evaluation of data received from NAS. Such adjustments are made mainly with the help of the application tools within each accounting section. For example, recalculation of fixed assets depreciation by useful life set in IFRS accounting and different from useful life in NAS. These adjustments are automated in the "Non-current assets" subsystem.
  3. After all the adjustments necessary for the transfer of the source NAS data to the data necessary for the preparation of the reporting under IFRS, repeat all the adjustments made in previous reporting periods for the reporting under IFRS in the transformational model. This is necessary because when you prepare the reporting in each next period, the balance on the accounts of assets, liabilities, and capital from NAS are received excluding the adjustments made for IFRS in previous periods. The accumulated data on balance accounts in the IFRS evaluation is lost. To repeat the adjustments of previous years, you can use several application options and settings.

The transformational model includes:

• Mapping (translation) rules of trial balance under NAS in trial balance of the target IFRS chart of accounts.
• Transformational adjustment set.
• Configuration accounting documents and their settings used for standard transactions.
• A set of initial trial balance (or reports) and drilldowns that allow you to calculate an adjustment amount and to drill down indicators in the required dimension.
• A set of final IFRS reporting.
  Transactional model

Preparing a report by way of transactional model is the same as by way of the transformational one, but it has some specifics.

In the transactional model, report instances are not created for the synthetic and analytical trial balance under NAS and IFRS as source data translation is taken from the accounting system.

In case of the transactional model of accounting, NAS accounting register entries are translated to IFRS accounting register entries.

Translated data is stored in the accounting register. You can use the data to generate a report by the accounting register on the IFRS chart of accounts, which is analytical trial balance under IFRS.

You can keep IFRS accounting under the transactional model using tools from the IFRS accounting application section.

The difference between the transformational model and the transactional model is that there is no need to reverse NAS data which change the evaluation in IFRS accounting. In case of the transactional model, not all source data is translated, but the one that will not be changed for IFRS reporting preparation. For instance, reserve accrual entries by accounts receivables are not translated from NAS because they are not accrued separately from IFRS in the "Provisions" subsystem.

The model does not repeat previous period adjustments as all the data is stored in the accounting register and displayed in IFRS trial balance in each subsequent period.

Similar to the transformational model, to collect comments to the financial reporting, report types are created for each comment.

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