Accounting policies used by Mongolian enterprises in the calculation of depreciation of non-current assets and their impact on financial statements: A Survey and A Case Study

Dorjpurev Polooj¹, Elbegzaya Purevjav^2*

* Corresponding Author: Elbegzaya Purevjav

¹ Accounting Department, University of Finance and Economics, Mongolia

² Accounting Department, University of Finance and Economics, Mongolia

Digital Object Identifier: 

https://doi.org/10.53468/mifyr.2023.03.03.13

Abstract- This study aims to evaluate the prevailing depreciation policies concerning non-current assets within enterprises and organizations in Mongolia. The investigation is bifurcated into two primary components: a comprehensive questionnaire survey and an in-depth case study. The survey, encompassing 35 enterprises, discerns a prevalent practice of computing depreciation and amortization for non-current assets in accordance with the provisions of the Corporate Income Tax Law, rather than adhering to the requirements of the International Financial Reporting Standards. This practice engenders apprehensions regarding the veracity of information presented within financial statements, a concern attributed to the dearth of resources allocated for the preparation of the “Report on differences between financial and tax statements (ST-30)” (The State Great Hural /Parliament/ Of Mongolia, 2020) and the nascent state of non-current asset accounting practices. Concomitantly, the case study selects a single organization from the surveyed cohort. Herein, a meticulous revision of its 180 units of non-current asset are executed in consultation with pertinent authorities, encompassing considerations of useful life, residual value, and depreciation methods, all mandatorily aligned with IFRSs (IFRAC, 2022). Remarkable disparities emerge between the updated depreciation costs for the past three years and the antecedent reports, thereby accentuating inquiries regarding the precision of information encompassed within the organization’s financial statements. Such uncertainties further extend to the plausible influence on decision-making processes undertaken by the recipients of said financial information.

Keywords: Non-Current Assets, Depreciation, IFRS, Corporate Income Tax Law, Financial statements, Financial information quality, True and Fair reporting

Article History: Received 10 June 2023, Received in revised form 13 June 2023, Accepted 10 September 2023