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Estonia - IFRS permitted for all companies

Since 2003, almost all Estonian companies can choose whether to prepare their consolidated and annual accounts in accordance with IFRS or in accordance with the Estonian accounting standards ("Estonian GAAP"). Listed companies and financial institutions are required to prepare their accounts in accordance with IFRS. The Estonian GAAP is written by the Estonian Accounting Standards Board (EASB).

The current version of the Estonian GAAP (effective since 2003) is basically a simplified summary of IFRS, primarily meant for small and medium-size entities, cross-referenced to corresponding paragraphs in IAS/IFRS standards, and focusing on areas, which are more relevant for the Estonian companies. The recognition and measurement rules are based on IFRS, but the disclosure requirements are less demanding. Therefore, net profit and equity are usually the same, regardless whether the accounts are prepared in accordance with IFRS or Estonian GAAP (but Estonian GAAP accounts are usually shorter and do not include as much disclosure as IFRS accounts).

As the volume of the Estonian GAAP standards is considerably smaller than IFRS (existing 17 Estonian GAAP standards make together about 400 pages), some accounting areas are covered only very briefly or not at all. In areas, which are not covered by the guidelines of the Estonian GAAP, the IFRS treatment is recommended, but not mandatory. Also, in a few areas the Estonian GAAP restricts the options offered by IFRS (e.g. Estonian GAAP does not allow the revaluation of PPE as described in the allowed alternative treatment of IAS 16). Each Estonian GAAP standard contains a brief comparison with the respective IFRS/IAS standards. Nevertheless, there are no conceptual differences between IFRS and Estonian GAAP.

In practice, most small and medium size entities apply Estonian GAAP. The Estonian Accounting Standards Board (EASB) decided that requiring the full IFRS disclosures would mean undue cost and effort for those entities. Nevertheless, the EASB also believes that all companies should be permitted to use IFRS if they wish to do so, as this enhances the overall quality of the financial reporting in Estonia. Comments (412)