Companies often discover their reporting obligations late, usually when a lender, an investor or a counterparty asks for audited statements that do not exist. The rules are clearer than their reputation suggests, and worth confirming before the question is put to you.
Public interest entities must apply full International Financial Reporting Standards. That category covers credit organisations, insurance companies, investment funds and their management companies, private social funds, entities operating in the securities market, and commercial organisations that meet two of three size criteria based on revenue, headcount and balance sheet total. Large entities that are not public interest entities apply IFRS for SMEs.
The obligation does not stop at preparation. Public interest entities and companies preparing consolidated statements must publish those statements together with the audit opinion, on their website and in the press. Audit itself is mandatory for entities required to publish, and limited liability companies and joint stock companies outside the micro and small business categories are required to engage an independent auditor annually.
Two practical points cause most of the difficulty. First, size criteria are tested against actual results, so a strong year can move a company into a higher category without any deliberate change in structure. Second, groups frequently underestimate when consolidation is triggered, and a consolidation requirement discovered late in the cycle is expensive to resolve.
If you are approaching a threshold, or you are unsure which framework applies to you, the time to establish that is now rather than during a lending conversation or a due diligence process.
BDO Azerbaijan provides statutory audit, IFRS conversion and financial reporting advisory as a full member of the Chamber of Auditors of Azerbaijan. Contact our audit and assurance team to confirm your obligations.