The European Commission (EC) in its 2006 publication on the planned implementation of International Financial Reporting Standards (IFRSs) in European Union (EU) member states, explains that Lithuanian listed companies are required to prepare their annual and consolidated financial statements in accordance with IFRSs. Lithuania complies with EC Regulation No. 1606/2002, which requires all EU-listed companies to prepare consolidated accounts following IFRSs as endorsed by the EC starting January 1, 2005. Basically, Lithuania does not permit other companies to apply IFRSs in their annual and consolidated accounts. However, banks and their controlled financial institutions are required to prepare their annual and consolidated financial statements pursuant to IFRSs. According to the 2007 KPMG Doing Business Guide, companies that do not apply IFRSs prepare their financial statements subject to Lithuanian Business Accounting Standards (LBASs), which are applicable as of January 1, 2004. As stated by KPMG, LBASs are simplified translations of IFRSs and generally require less disclosure than the corresponding IFRSs. Some areas, such as accounting for derivative and hedging financial instruments, employee benefits, and accounting by retirement benefit plans are not covered by LBASs at all. At the end of 2006, there were 32 LBASs in force.

General Overview

According to a 2006 European Commission (EC) publication on the planned implementation of International Financial Reporting Standards (IFRSs) in European Union (EU) member states, Lithuanian listed companies are required to prepare their annual and consolidated financial statements in accordance with IFRSs. Lithuania therefore complies with EC Regulation No. 1606/2002, which requires all EU-listed companies to prepare consolidated accounts following IFRSs as endorsed by the EC, starting January 1, 2005. Lithuania does not permit other companies to apply IFRSs in their annual and consolidated accounts except for banks and their controlled financial institutions, which are required to prepare their annual and consolidated financial statements pursuant to IFRSs. According to the 2007 KPMG Doing Business Guide, companies that do not apply IFRSs prepare their financial statements pursuant to Lithuanian Business Accounting Standards (LBASs). As stated by KPMG, "LBASs can be regarded as summarized and simplified translations of the corresponding...IFRSs" (p. 86).

LBASs, which are applicable as of January 1, 2004, are set by the Institute of Accounting (IARL). The 2007 KPMG report explains that "as a general principle, LBASs require less disclosure than the corresponding IASs and IFRSs. Besides that, LBASs follow the benchmark treatments of IASs and do not provide for alternatives. A number of areas such as accounting for derivative and hedging financial instruments, employee benefits and accounting by retirement benefit plans are not covered by the LBASs at present" (p. 86). At the end of 2006, there were 32 LBASs in force.

According to the 2002 World Bank ROSC, financial reporting in Lithuania is governed by the 2002 Accounting Law, the 2002 Law on Financial Statements, and the 2002 Law on Consolidated Financial Statements. In addition, the Securities Commission and the Bank of Lithuania (BoL) issued rules that set forth some additional accounting requirements for the entities under their respective supervision. In 2002, the World Bank stated that, even though the Securities Commission had the powers to enforce and monitor compliance with national accounting standards and IFRSs, the Commission lacked the necessary staff to carry out these powers. On the other hand, the BoL, which enforces the compliance of banks with IFRSs and BoL regulations, carried out its enforcement powers effectively.

The International Federation of Accountants (IFAC) lists the Lithuanian Chamber of Auditors (LCA) as a member of the IFAC. According to the 2002 World Bank ROSC, the LCA is responsible for the development, monitoring, and enforcement of auditing standards in Lithuania. In addition, it released a Professional Code of Ethics, which is based on the 2000 IFAC Code of Ethics.

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

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According to the IARL website, the corresponding national accounting standards are LBAS 2 Balance Sheet (effective January 1, 2004), LBAS 3 Income Statement (effective January 1, 2004), LBAS 4 Statement of changes in Equity (effective January 1, 2004), and LBAS 6 Explanatory Notes (effective January 1, 2006). However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IFRS 2: Share-based Payment (effective 2005)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IFRS 3: Business Combinations (effective 2004)

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According to the IARL website, the corresponding national accounting standard is LBAS 14 Business Combinations effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IFRS 4: Insurance Contracts (effective 2006)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IFRS 7: Financial Instruments: Disclosures (effective 2007)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 1: Presentation of Financial Statements (effective 2007)

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According to the IARL website, the corresponding national accounting standard is LBAS 1 Financial Statements effective December 31, 2006. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 2: Inventories (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 9 Inventories effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 7: Cash Flow Statements (effective 1994)

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According to the IARL website, the corresponding national accounting standard is LBAS 5 Cash Flow Statements effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 7 Changes in Accounting Policies, Accounting Estimates and Correction of Errors effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 10: Events after the Reporting Period (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 19 Provisions, Contingent Liabilities and Contingent Assets, and Events Occurring After the Balance Sheet Date effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 11: Construction Contracts (effective 1995)

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According to the IARL website, the corresponding national accounting standard is LBAS 25 Construction and Other Long-Term Contracts effective January 1, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 12: Income Taxes (effective 2001)

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According to the IARL website, the corresponding national accounting standard is LBAS 24 Income Tax effective January 1, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 14: Segment Reporting (effective 1998)

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According to the IARL website, the corresponding national accounting standard is LBAS 34 Segment Reporting effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 16: Property, Plant and Equipment (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 12 Non-Current Tangible Assets effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 17: Leases (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 20 Operating Lease, Financial Lease and Loan-for-Use effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 18: Revenue (effective 1995)

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According to the IARL website, the corresponding national accounting standard is LBAS 10 Revenue from Sales effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 19: Employee Benefits (effective 2006)

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According to the 2007 KPMG Doing Business Guide, there is no corresponding LBAS.

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

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According to the IARL website, the corresponding national accounting standard is LBAS 21 Grants and Subsidies effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 22 Changes in Foreign Exchange Rate effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 23: Borrowing Costs (effective 1995)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 24: Related Party Disclosures (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 30 Related Parties effective January 1, 2006. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

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According to the 2007 KPMG Doing Business Guide, there is no corresponding LBAS.

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 16 Consolidated Financial Statements and Accounting for Investments in Subsidiaries effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 28: Investments in Associates (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 15 Investment in Associates effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 31: Interests in Joint Ventures (effective 2005)

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According to the IARL website, the corresponding national accounting standard is LBAS 37 Investments in the Objects of Joint Activity (Partnership) Contracts effective January 1, 2007. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 33: Earnings per Share (effective 2005)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 34: Interim Financial Reporting (effective 1999)

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According to the IARL website, the corresponding national accounting standard is LBAS 29 Interim Financial Reporting effective January 1, 2006. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 36: Impairment of Assets (effective 2004)

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According to the IARL website, the corresponding national accounting standard is LBAS 23 Impairment of Assets effective January 1, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

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According to the IARL website, the corresponding national accounting standard is LBAS 19 Provisions, Contingent Liabilities and Contingent Assets, and Events Occurring After the Balance Sheet Date effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 38: Intangible Assets (effective 2004)

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According to the IARL website, the corresponding national accounting standard is LBAS 13 Intangible Assets effective January 1, 2004. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

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According to the 2007 KPMG Doing Business Guide, accounting for derivative and hedging financial instruments is not covered by LBASs.

IAS 40: Investment Property (effective 2005)

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There is insufficient information publicly available as to Lithuania's compliance with this principle.

IAS 41: Agriculture (effective 2003)

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According to the IARL website, the corresponding national accounting standard is LBAS 17 Biological Assets Date effective January 1, 2005. However, there is insufficient information publicly available as to Lithuania's compliance with this principle.