Serbia: New Law on Accounting Adopted

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Serbia has got a new Law on Accounting („Law”). Its proclaimed aim is to improve the quality of financial reporting in the Republic of Serbia („RS”) and to harmonize the local legislation with the relevant EU Directives.

Here are some of the most relevant novelties introduced by the Law:

  1. Insolvency estate as the subjects of application of Law. - For the first time, insolvency estate is set out as one of the entities to which the Law applies.
  1. Classification of legal entities and entrepreneurs. - In accordance with former legislation, legal entities are classified as micro, small, medium and large. In this respect, the most relevant novelty introduced by Law is that the entrepreneurs for the first time are not automatically classified as micro legal entities, therefore the provisions regarding classification of legal entities shall be applied to them. Also, the Law redefines other criteria for classification – e.g. the revenue amounts used for classifying business entities have been changed.
  1. Application of the IFRS.- Small, micro and other legal entities may apply IFRS (in addition to the prescribed application of IFRS for SMEs), with the condition that the IFRS shall be applied continuously in the period of at least 5 years.
  1. Accounting documents. - The Law introduces a difference between the persons who prepare accounting documents and the persons who review them before accounting. Also, it is prescribed that from 1 January 2022 the accounting documents must be in electronic form. Further, the Law precisely defines the method of accounting documents review, and inter alia stipulates that persons who are indebted to the values to which the documents relate may not review them. Finally, some of the statutory deadlines have been changed as well.
  1. Obligation to draft the Annual Business Report. – In order to harmonize with EU legislation, Law stipulates that only micro and small legal entities are exempted from the obligation to draft Annual Business Report, i.e. the exemption does not apply to medium legal entities.
  1. Stipulation to draft the Notes. One of the most important novelties introduced by the Law is the obligation to draft Notes to financial statements. Exceptionally, this obligation does not apply to the entrepreneurs that are classified as micro legal entities and other legal entities (as defined precisely in the Law), which are obligated to draft the Balance Sheet and Income Statement only.
  1. Submission of financial statements.Primarily, the Law excludes the obligation to submit two sets of statements (Regular Annual Financial Statement and Data for Statistical and Other Purposes). Financial statements must be submitted by March 31st, of the current year for the previous year.
  1. Bookkeeping and drafting of financial statements.Employees in legal entities and entrepreneurs which keep books (i.e. where bookkeeping is not done by other legal entity or another entrepreneur) do not have the obligation to be an accountant or auditor. On the other hand, the most relevant novelty (also the most controversial one) is that bookkeeping and drafting of financial statements may be entrusted by a contract exclusively to another legal entity or entrepreneur that is registered by the Register of the Providers of Accounting Services. More detailed conditions regarding the registration in the Register of Accounting Services Providers are also prescribed by the Law.

The Law also introduces other novelties (e.g. new form for Balance Sheet and Income Statement), so it will have an impact on a large number of subjects, especially on the way accounting services are performed in the RS.