Accounting of foreign economic activity has some peculiarities connected with the specific character of the activity itself and with the special accounting rules of individual operations in it.
Foreign economic activity is an economic activity in which a company registered in Georgia cooperates with foreign partners. In foreign economic activity, as well as in operations within Georgia there may be any business operations: purchase and sale of works and services, receipt and provision of loan funds, rent/lease, receipt and payment of dividends, business trips, and settlements of claims.
Accounting in foreign economic activity has its features related to:
- a fairly large number of additional documents;
- payments in currencies;
- additional entries related to foreign business trips;
- a special procedure of VAT accounting and reporting;
- and the necessity for taxation and additional reporting on revenues paid to foreign partners.
What has changed in foreign economic activity in 2022?
In 2022, participants in foreign economic activity were mainly affected by the sanctions agenda and instability of the national currency, as they entailed additional requirements and document checks.
Documents arising in the course of FEA
The FEA application will require the use of a large number of documents that are not necessary if the activity is carried out only within Georgia, provided that they include not only those executed by the Georgian party, but also received from foreign partners. Concerning export/import, in particular, these will be:
- contracts with foreign partners, drawn up taking into account the terms of delivery reflected in Incoterms;
- payment documents of foreign partners;
- documents (apostille) confirming the registration of the foreign partner in a foreign country;
- cargo customs declarations (CCD);
- invoices, which will become accounting documents for shipments;
- foreign shipping documents and foreign documents (invoices) of suppliers;
- tax calculations containing data on income paid to foreign partners;
- documents for payment of taxes payable to the payment of income to foreign partners;
- other documentation.
Most of the documents addressed to or received from a foreign partner are initially drawn up in 2 languages, and the documents drawn up in a foreign language shall be accompanied by a translation of the text required for the tax authorities during an audit.
At the same time not only does the volume of documents increase but also the number of inspections by the tax authorities (in connection with VAT refunds on exports) and customs (in connection with the declaration of goods) that require submission of their copies.
Accounting: peculiarities in FEA
Peculiarities of accounting for foreign economic activity will require:
- accounting for amounts received or expressed in currency (bank, cash desk, settlements with counterparties) in two currencies in parallel: foreign currency with its conversion in Lari;
- tracking the dates of transfer of ownership of exported/imported goods under the Incoterms specified in the contract;
- formation of the cost of goods purchased abroad with the inclusion of additional customs payments therein
- recognition of expenses for foreign business trips;
- inclusion of the results of revaluation of cash balances and settlements with counterparties denominated in foreign currency into the financial result as of the reporting date;
- recording of taxes additionally accrued in connection with the FEA introduction.
Organisation of accounting for foreign economic activity entails not only an increase in the number of accounting documents used but also some features: both in the reflection of accounting transactions and in the preparation of reports.