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Mongolian Businesses Brace for Stricter Financial Compliance: New Accounting and Auditing Regulations

In an attempt to align its accounting and auditing framework with international standards, Mongolia’s professional body, the Mongolian Institute of Certified Public Accountants (MoniCPA), has issued new regulations. These regulations result from the following:

  • Findings from the World Bank’s Report on the Observance of Standards and Codes (ROSC) Accounting and Auditing assessment.
  • MoniCPA’s response to the International Federation of Accountants (IFAC) survey on standard-setting and regulation.
  • Mongolia’s active membership in the Asian-Oceanian Standard-Setters Group (AOSSG).

Changes to Accounting Principles and Financial Reporting Framework

The Mongolian Accounting Law, which passed in 1993 and has been amended several times since, now mandates that all for-profit and non-profit entities, regardless of size, follow international accounting principles. This includes alignment with International Financial Reporting Standards (IFRS), aiming for increased transparency and comparability.

This latest requirement is part of Mongolia’s ongoing efforts to strengthen its financial reporting system and adhere to international best practices. The following types of entities are subject to these regulations:

  • State-owned enterprises
  • Small and medium enterprises
  • Entities in sectors such as banking, finance, insurance, and brokerage

Adherence to International Accounting Standards

The Mongolian Institute of Certified Public Accountants requires that the financial statements of businesses and organizations in Mongolia adhere to international accounting standards.

Composition of Financial Statements

Under the Mongolian Accounting Law, financial statements must now be prepared based on IFRS. This consists of several components:

  • Income statement: A record of revenues and profits/losses for a given period.
  • Statement of financial position: An overview of the organization’s assets, liabilities, and equity.
  • Statement of cash flows: An analysis of the inflow and outflow of cash in the organization.
  • Statement of changes in equity: Information on the effects of transactions and other events on equity.

##Entities Regulated by the Audit Law

The Mongolian Audit Law stipulates that the following types of businesses and organizations must undergo external audits:

  • Shareholding companies listed on the stock exchange
  • Companies seeking stock exchange listing
  • Business entities with a statutory fund of 50 million Togrog (approximately USD$40,000) or more
  • Business entities intending to sell all assets through public bidding
  • Entities with foreign investment, unless otherwise stated by law or international treaties
  • Fully or partially state-owned entities
  • Bank, financial, and insurance organizations
  • Companies engaged in brokerage and dealing or functioning as investment funds
  • Labor unions

Auditing standards are established by the Audit Committee of Mongolian Institute of Certified Public Accountants. This demonstrates Mongolia’s dedication to maintaining a robust regulatory environment that supports transparency, accountability, and credibility for businesses and investors alike.