General Rules For State Accounting

Link to law: https://www.riigiteataja.ee/en/eli/ee/RHM/reg/527082015001/consolide
Published: 2014-11-24

General Rules for State Accounting

Passed 11.12.2003 Annex 105
RTL 2003, 130, 2103
Entry into force 01.01.2004
Amended by the following legal instruments (show)

Passed
Published
Entry into force

26.07.2004
RTL 2004, 104, 1685
06.08.2004

21.02.2005
RTL 2005, 26, 366
11.03.2005

16.01.2006
RTL 2006, 11, 198
03.02.2006

16.11.2006
RTL 2006, 85, 1547
08.12.2006

12.10.2007
RTL 2007, 79, 1368
29.10.2007

15.12.2008
RT III 2008, 52, 360
15.12.2008

29.12.2008
RTL 2009, 4, 54
17.01.2009

27.02.2009
RTL 2009, 22, 279
13.03.2009

20.04.2009
RTL 2009, 37, 497
01.05.2009

28.12.2009
RTL 2010, 2, 24
11.01.2010

14.10.2010
RT I 2010, 77, 591
22.10.2010, partially 1.01.2011

29.10.2010
RT I, 09.11.2010, 1
01.01.2011

28.12.2010
RT I, 05.01.2011, 5
08.01.2011

12.12.2011
RT I, 15.12.2011, 1
18.12.2011, partially 1.01.2012

07.11.2012
RT I, 13.11.2012, 7
16.11.2012, partially 01.01.2013

03.12.2013
RT I, 10.12.2013, 1
13.12.2013, partially 01.01.2014

17.11.2014
RT I, 21.11.2014, 7
24.11.2014

The regulation is enacted on the basis of § 35 (2) and (3) and § 36 (1) of the Accounting Act.
[RTL 2009, 22, 279 - entry into force 13.03.2009]

Chapter 1 GENERAL PROVISIONS 

§ 1.  Purpose and general principles of the general rules for state accounting

(1) The purpose of the general rules for state accounting (hereinafter general rules) is to establish the procedures for accounting and financial reporting of the Republic of Estonia as a public legal person (hereinafter state) and to provide for the reporting of the general government sector and public sector.
(2) The general rules are based on the accounting principles generally accepted in Estonia. The accounting methods described in the general rules are based on the Accounting Act, guidelines of the Accounting Standards Board (hereinafter ASBG), as well as International Public Sector Accounting Standards (hereinafter IPSAS).
(3) The general rules explain and clarify the requirements of the accounting principles generally accepted in Estonia applicable to the state and state accounting entities specified in § 2 (4) of the Accounting Act and constitute accounting policies and procedures of the state within the meaning of § 11 of the Accounting Act.
(4) State accounting entities establish in their accounting policies and procedures in accordance with requirements of the general rules supplementary accounting and reporting requirements applicable to the state accounting entities and units thereof which are separate accounting entities (hereinafter units of state accounting entities).
(5) Units of state accounting entities may have their own accounting policies and procedures, subject to requirements established in the general rules and accounting policies and procedures of the state accounting entities.

§ 2.  Application of general rules to the state and state accounting entities

(1) General rules are applicable to the state and state accounting entities.
(2) General rules are applicable to units of state accounting entities, unless otherwise specified in the general rules.
(3) If a state accounting entity's accounting function is centralised, all requirements established in the general rules to units of state accounting entities will apply.

§ 3.  Public sector entities and related entities

(1) Public sector entities within the meaning of the general rules are public legal persons and legal persons under their direct or indirect controlling influence.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(2) Related entities within the meaning of the general rules are legal persons under the direct or indirect (i.e. through entities under their controlling or significant influence) influence of public sector entities.
(3) Indirect controlling or significant influence is deemed to be influence over a legal person that:
1) is owned by one public sector entity through entities under controlling or significant influence and through entities under their controlling or significant influence;
2) is owned jointly by public legal persons and entities under their controlling or significant influence, although no person separately holds controlling or significant influence.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(4) Controlling and significant influence is determined by reference to the definitions provided in § 27 (1) and ASBG 11, as well as the principles provided in IPSAS 06 (Consolidated Financial Statements and Accounting for Controlled Entities).
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(5) Public sector companies are referred to in the general rules as subsidiaries.
(6) Companies under significant influence of public sector entities are referred to in the general rules as associates.
(7) The list of public sector entities and related entities together with trading partner codes (hereinafter list of trading partners) is provided in Annex 2 to the general rules. The three first digits of the trading partner code represent an entity of controlling or significant influence and this is referred to in the general rules as group code.
(8) Changes in the list of trading partners are accounted for from the date when the change occurred. A public sector entity that formed, acquired, sold, liquidated or reorganised another public sector entity or related entity will disclose information on the change via email to the State Shared Service Centre by the date that the change entered into force. The State Shared Service Centre publishes the change in the list of trading partners on its website.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]

§ 4.  Application of general rules to local government entities, other public legal persons, foundations, non-profit associations, State Forest Management Centre and subsidiaries

Local government entities, other public legal persons, foundations and non-profit associations that are part of the public sector, the State Forest Management Centre and subsidiaries with a separate trading partner code in the list of trading partners must:
1) submit trial balances in accordance with the accounting principles presented in the general rules based on the chart of accounts provided in annexes 1, 2, 3, 4 and 5 to the general rules by following the deadlines and procedure set forth in Chapter 3 of the general rules;
2) submit annual reports pursuant to § 11 of the general rules;
3) communicate any changes in the list of trading partners pursuant to § 3 (8).
[RTL 2004, 104, 1685 - entry into force 06.08.2004]

§ 5.  Application of general rules to related entities

Foundations, non-profit associations and associates under significant influence of public sector entities must:
1) submit annual reports by the term provided in § 11 of the general rules;
2) submit their balance sheet as at the end of each quarter to the public sector entity of significant influence by the 25th day following the end of the quarter and as at the end of the calendar year by 25 March of the following year.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]

Chapter 2 CHART OF ACCOUNTS 

§ 6.  Chart of accounts

(1) A chart of accounts consists of the following codes:
1) account codes (Annex 1);
2) trading partner codes (Annex 2);
3) function codes (Annex 3);
4) source codes (Annex 4);
5) cash flow codes (Annex 5);
(2) Each different combination of the chart of accounts comprised of account, trading partner, function, source and cash flow code is referred to as an account combination in the general rules.
(3) A trading partner, function, source or cash flow code is added to a selected account if the account (Annex 1) contains the attribute "required" in the relevant column.
(4) [Repealed - RTL 2006, 85, 1547 - entry into force 08.12.2006]

Chapter 3 REPORTS 

§ 7.  Trial balances

(1) A trial balance within the meaning of the general rules is a sorted list of account combinations and their balances according to the chart of accounts provided in Annexes 1, 2, 3, 4 and 5 to the general rules.
(2) A consolidated trial balance within the meaning of the general rules is a trial balance where the account combination balances representing inter-entity assets, liabilities, net assets, income and expenses of group entities have been eliminated.
(3) Public sector entities that have a joint trading partner code must submit a joint consolidated trial balance.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(4) A trial balance is submitted to the trial balance information system of the Ministry of Finance electronically as an XML file. The trial balance form and explanations for completion are provided in Annex 6 to the general rules.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(5) The State Shared Service Centre issues to public sector entities rights and passwords needed to be able to use the trial balance information system.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(6) Submitters of trial balances are entitled to access the trial balance information system to view existing chart of accounts codes, amend entered trial balances, prepare reports and inquiries. Additionally, parent entities are entitled to view the data of consolidated entities and to prepare reports and inquiries concerning them, as well as to prepare consolidated reports.
(7) State accounting entities, which have sub-entities with an independent accounting function, centralise their accounting. If accounting is centralised, entities are assigned by the start of the year 2008 a joint trading partner code and a joint consolidated trial balance is submitted for the entities.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(8) [Repealed - RT I 2010, 77, 591 - entry into force 22.10.2010]
(9) Local governments and other public legal persons may maintain separate trading partner codes for their sub-entities until the end of the year 2007 and joint trial balances must be submitted for the accounting entity as a single legal person effective from the start of the year 2008. A joint trial balance does not contain inter-entity balances of sub-entities.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(10) Companies, foundations and non-profit associations that prepare consolidated financial statements may maintain separate trading partner codes for their group entities until the end of the year 2007 and joint consolidated trial balances must be submitted for the group effective from the start of the year 2008.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(11) In justified cases, local governments, other public legal persons, companies, foundations and non-profit associations may apply for an extension from the Ministry of Finance to the term provided in subsections (9) and (10) of this section.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(12) [Repealed - RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(13) Trial balances are retained in the trial balance information system for at least 10 years. Trial balances submitted as at the end of the fiscal year may be deleted from the trial balance information system if the electronic reports prepared on the basis of such data have been filed with the National Archives.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]

§ 8.  Trial balance periods

(1) Units of state accounting entities (the fourth digit of the trading partner code is 0), local government entities (the fourth digit of the trading partner code is 1), other public legal persons of the general government sector (the fourth digit of the trading partner code is 2) and foundations, non-profit associations and companies of the general government sector (the fourth digit of the trading partner code is 3) submit trial balances monthly. Other trial balances are submitted quarterly.
[RTL 2010, 2, 24 - entry into force 11.01.2010]
(2) Monthly trial balances are submitted in chronological order from the start of the calendar year (balance sheet account balances are to be submitted as at the end of the reporting month and income statement account balances are to be submitted for the period from the start of the calendar year until the end of the reporting month).
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(3) Quarterly trial balances are submitted in chronological order from the start of the calendar year (balance sheet account balances are to be submitted as at the end of the reporting quarter and income statement account balances are to be submitted for the period from the start of the calendar year until the end of the reporting quarter).
[RTL 2006, 85, 1547 - entry into force 08.12.2006]

§ 9.  Deadlines for submission and audit of trial balances

(1) [Repealed - RTL 2007, 79, 1369 - entry into force 29.10.2007]
(2) Trial balances are due by the 25th day of the month following the reporting month or quarter.
[RT I, 10.12.2013, 1 - entry into force 01.01.2014]
(3) Assets, liabilities, income, expenses and net asset balances are reconciled with those of other trial balance submitters quarterly as at the end of each quarter pursuant to § 52 (8) of the general rules. In case of differences in balances or if additional inter-group entries are needed, adjustments are made to trial balances pursuant to § 52 (8) and § 53 (3) and (4) of the general rules. Such reconciliation and adjustment is concluded within 7 working days from the trial balance submission deadline, with the exception of year-end trial balances. Adjustments are made to year-end trial balances (including to rectify problems identified in the course of audit) until 31 March of the following year.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(4) After 31 March, the State Shared Service Centre may be requested to implement adjustments to year-end trial balances if material errors are identified in the annual report of a reporting entity in the course of audit. The State Shared Service Centre corrects material errors until 30 April.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(5) If immaterial adjustments after 31 March or material adjustments after 30 April of the following year are made to the financial statements of public sector entities, the adjustments to the trial balances are included in the changes to balances of the next fiscal year.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(6) Parent entities are liable for the on-time receipt of trial balances within their governing area, explaining the reasons if late and notifying members of management of any delays.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]

§ 10.  Consolidation of trial balances

(1) The trial balance information system uses trading partner codes for the automatic consolidation of trial balances.
(2) If a state accounting entity is comprised of multiple accounting entities, the trial balance of the state accounting entity is prepared upon consolidation of its constituent entities where the balances of the entities' same account combinations are added together on a line-by-line basis and the internal balances of account combinations representing inter-entity receivables, liabilities, income and expenses where the first four digits of the trading partner code are the same are eliminated.
(3) Once the constituent sub-entities of a local government entity have submitted their separate trial balances, the trial balance of the local government entity is prepared in the trial balance information system by adding together the account combination balances of the same type of the sub-entities of the local government entity on a line-by-line basis and by eliminating the inter-entity receivables, liabilities, income and expenses.
(4) Consolidated general government trial balances are prepared by adding together the account combination balances of the same type of the general government sector entities and the account combination balances where the fourth digit of trading partner code is from zero to three are eliminated.
(5) The consolidated financial statements of the state are prepared by compiling a trial balance in which the account combination balances of the same type of units of state accounting entities are added together on a line-by-line basis and the account combination balances representing internal receivables, liabilities, income and expenses where the first three digits of the trading partner code are between 001 and 034 and the fourth digit is 0 are eliminated.
(6) The consolidated financial statements of a local government entity are prepared by compiling a trial balance in which the trial balance account combination balances of the same type of local government entities and the foundations, non-profit associations and subsidiaries under its controlling influence are added together on a line-by-line basis and the account combination balances representing inter-entity receivables, liabilities, net assets, income and expenses where the first three digits of the trading partner code are the same and the fourth digit is between 0 and 5 are eliminated.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(7) The consolidated financial statements of other public legal persons are prepared by compiling a trial balance in which the account combination balances of the same type of other public legal persons and the foundations, non-profit associations and subsidiaries under its controlling influence are added together on a line-by-line basis and the account combination balances representing inter-entity receivables, liabilities, net assets, income and expenses where the first three digits of the trading partner code are the same and the fourth digit is between 0 and 5 are eliminated.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(8) The consolidated financial statements of the state are prepared by compiling a trial balance in which the account combination balances of the same type of state accounting entities and the state and the foundations, non-profit associations, the State Forest Management Centre and subsidiaries under the state's controlling influence are added together on a line-by-line basis and the account combination balances representing inter-entity receivables, liabilities, net assets, income and expenses where the first three digits of the trading partner code are between 001 and 034 and the fourth digit is between 0 and 5 are eliminated.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(9) The consolidated annual report of the public sector is prepared by compiling a trial balance in which the account combination balances of the same type of units of all public sector entities are added together on a line-by-line basis and the account combination balances representing inter-entity receivables, liabilities, net assets, income and expenses among public sector entities where the first three digits of the trading partner code are between 001 and 799 and the fourth digit is between 0 and 5 are eliminated.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]

§ 101.  Monthly, quarterly and annual reports of the general government sector and its subsectors

(1) The State Shared Service Centre prepares monthly consolidated statements of financial performance of the state, central government, local government entities and social security funds on the basis of trial balances of general government entities by the last day of the following month and discloses on its website the surplus or deficit, revenue and expenses determined based on the aforementioned reports.
(2) At least the surplus or deficit, total revenue and total expenses in the particular month and year-to-date of the state, central government, local government entities, social security funds and the general government sector as a whole are disclosed on a monthly basis. A supplementary quarterly report discloses the aforementioned data on a quarterly basis and year-to-date.
(3) On the same website, the State Shared Service Centre publishes a description by Statistics Estonia on how the disclosed data is related to the general government sector and its subsector data according to the methodology of the European system of national and regional accounts in the European Union.
(4) As at the year-end date, the State Shared Service Centre publishes by 30 June of the following year on the same website information on guarantees by the general government and its subsectors, liabilities of public sector companies, off-balance sheet concession arrangements for services between the public and the private sector, allowances for doubtful debts and ownership interest in companies.
[RT I, 10.12.2013, 1 - entry into force 01.01.2014]

§ 11.  Annual report

(1) State accounting entities prepare annual reports based on the form provided in Annex 7 to the general rules. Presented information must correspond to the trial balance of the state accounting entity.
(2) State accounting entities use reports obtained from the e-Treasury to prepare the report on the implementation of the state budget that is incorporated in the annual report of state accounting entities.
(3) Annual reports of state accounting entities are approved by the person responsible for accounting at the state accounting entity specified in § 12 (2) of the general rules.
(4) [Repealed - RTL 2006, 85, 1547 - entry into force 08.12.2006]
(5) Local governments, other public legal persons, public sector foundations, non-profit associations, the State Forest Management Centre and subsidiaries prepare annual reports in accordance with accounting principles presented in the general rules based on requirements applicable to annual reports provided in the Accounting Act and ASBGs.
[RT III 2008, 52, 360 - entry into force 15.12.2008 - Partially repealed to the extent that it obligates local governments to prepare their annual reports based on ASBG requirements.]
(6) Where the accounting principles set forth in ASBGs differ from those of the general rules, the accounting principles of the general rules will prevail.
(7) Local governments and other public legal persons must disclose their duly approved annual report including all of its constituent parts on its website within 7 working days from the approval of the annual report. Thereafter they must promptly notify the Ministry of Finance or submit their duly approved annual report including all of its constituent parts to the Ministry of Finance within 7 working days from the approval of the annual report.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(8) Subsidiaries and foundations, non-profit associations, the State Forest Management Centre and associates under controlling or significant influence of public sector entities submit their duly approved annual report to the entity exercising controlling or significant influence within 7 working days from the approval of the annual report.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(9) State accounting entities preparing and submitting to the Ministry of Finance an action plan as a source document for budgeting must submit to the Ministry of Finance by 1 March of the year following the fiscal year the report on the implementation of the action plan for the fiscal year as a source document for the preparation of an activity report. The Ministry of Finance publishes the form of the report on the implementation of action plans on its website.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(10) Public sector entities preparing annual reports in accordance with the accounting principles generally accepted in Estonia are responsible for ensuring that trial balances prepared or consolidated trial balances compiled as at the fiscal year-end date correspond to the accounting data presented in the annual report. An explanation is to be provided to the State Shared Service Centre concerning any differences arising from adjustments based on § 9 (5) of the general rules. Public sector entities preparing annual reports in accordance with International Financial Reporting Standards must provide an explanation to the State Shared Service Centre concerning any differences between the trial balance and annual report if the accounting principles presented in the general rules do not correspond to those applied in the annual report.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(11) Subsidiaries preparing annual reports in accordance with the accounting principles generally accepted in Estonia, in cases where their parent entity is a public sector entity applying International Financial Reporting Standards may apply the same accounting principles as its parent entity in the preparation of its annual report.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(12) Public sector entities whose main purpose is to provide its owner with a profit and that prepare their annual reports in accordance with the accounting principles generally accepted in Estonia and where the profit or loss for the period presented in their annual report is materially influenced by government grants related to assets must add the following lines in their income statement after the line "Profit (loss) for the year":
1) "Including income from grants related to assets";
2) "Including depreciation and impairment of assets funded by grants";
3) "Including profit (loss) for the year if the net method for grants is used".
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]

Chapter 4 MANAGEMENT OF STATE ACCOUNTING 

§ 12.  State accounting system structure

(1) State accounting is managed on a decentralised basis for each state accounting entity.
(2) The head of the state accounting entity is responsible for the accounting of the state accounting entity.
(3) Management is in charge of the day-to-day activities of state accounting entities, including the management of accounting.
(4) The accounting of state accounting entities is directly handled by its accounting officer whose rights, obligations and responsibility are determined by their job description.
(5) State accounting entities manage their accounting within the scope of their governing or administrative area by implementing relevant rules in their accounting policies and procedures. If a state accounting entity is comprised of units of the state accounting entity, the accounting policies and procedures of the state accounting entity must also impose rules for them.
(6) Accounting policies and procedures of state accounting entities establish the division of responsibility between the state accounting entity and its units with separate accounting functions.
(7) The Ministry of Finance will oversee the transition of state accounting entities and units thereof to SAP enterprise software.
[RT I, 05.01.2011, 5 - entry into force 08.01.2011]
(8) The Ministry of Finance includes in its financial reports the licences, development costs and maintenance costs necessary for use of the SAP enterprise software.
[RT I, 05.01.2011, 5 - entry into force 08.01.2011]

§ 13.  Accounting for assets and liabilities

(1) Assets are included in the balance sheet of the state accounting entity that exercises controlling influence over such assets (i.e. controls the use of the assets) and bears the main risks associated with use of the assets. Controlling influence over assets, as defined in the general rules, generally constitutes the ability to use assets in one's economic activities even if they generate no economic benefits.
(2) If multiple units of a state accounting entity collectively finance asset acquisition and subsequently collectively use the assets and it is not possible to physically divide the assets between various users, the assets are allocated based on a collective written agreement between the funders in such a manner that each recognises the portion of the assets they use or, if the value of such portion is below the capitalisation threshold for non-current assets, expenses the assets in the statement of financial performance of the reporting period, adding the memo "portion of collective assets, basis" to the details of the recognised assets.
(3) If one unit of a state accounting entity finances the acquisition of assets by another unit, the asset acquired is transferred to the balance sheet of its users.
(4) Receivables are generally included in the accounts of the unit of a state accounting entity that represents the state in their collection.
(5) Financial investments (equities, fixed-income securities and other securities) are generally included in the accounts of the unit of a state accounting entity that represents the state in the respective transactions.
(6) Net assets of subsidiaries and associates are generally included in the accounts of the unit of a state accounting entity that represents the state in the general meeting of shareholders of the subsidiaries and associates.
(7) Net assets of foundations and non-profit associations are included in the accounts of the unit of a state accounting entity that exercises the greatest degree of control over the entity - exercising the rights of a founder, approves the annual report, has the right to appoint the majority of members of management or higher governing body, initiate entity's dissolution or liquidation, entitlement to the remaining assets upon liquidation or dissolution after the settlement of debts, or the existence of other similar relationship.
(8) Liabilities are included in the accounts of the unit of a state accounting entity that is either legally obligated to settle the liability or has settled such liabilities in the course of previous activities.
(9) Loans and other borrowings are included in the accounts of the unit of a state accounting entity that represents the state in such legal relationships. National student loans where the state guarantee has been called upon are included in the accounts of the Ministry of Education and Research because the Ministry must handle their valuation and collection.
(10) Balance sheets of units of state accounting entities do not contain assets whose cost or fair value cannot be measured reliably or obligations that are not probable or not reliably measurable. Such assets and liabilities are included in off-balance sheet accounts and disclosed in the annual financial statements of state accounting entities (including, where possible, an estimate as to their potential value).
(11) The allocation of assets and liabilities between a state accounting entity's units is detailed in the accounting policies and procedures of the state accounting entity if necessary. A state accounting entity must ensure that all of its assets and liabilities are included only once in its financial statements and that inter-entity receivables and liabilities are eliminated.

§ 14.  Recognition of income and expenses

(1) Tax revenue is recognised in the statement of financial performance of the unit of state accounting entity that has been designated as the recipient of the tax pursuant to law. State fees, income from economic activities and other income are recognised in the statement of financial performance of the unit of state accounting entity that earned the revenue by selling goods or rendering services.
(2) If the law provides for pass-through of collected tax, state fee or other fee, the recognised revenue is concurrently expensed as a pass-through consideration. Recipients of pass-through taxes, state fees or other fees recognise revenue in accordance with communications submitted by the pass-through entity.
(3) Expenses are recognised in the statement of financial performance of the unit of state accounting entity that used the expense in its activities. If a unit of state accounting entity partially or fully finances the expenses of other units of state accounting entities, the funder will transfer such expenses to the entities receiving goods, services or other benefits in exchange for the expenses.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(4) Income and expenses directly arising from assets or liabilities are generally recognised in the statement of financial performance of the unit of state accounting entity that has included such asset or liability in its balance sheet.
(5) The allocation of income and expenses between a state accounting entity's units is detailed in the accounting policies and procedures of the state accounting entity if necessary. A state accounting entity must ensure that all of its income and expenses are included only once in its financial statements and that inter-entity income and expenses are eliminated.
(6) If accounting is centralised, income and expenses of government agencies are accounted for separately.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]

§ 15.  Verification of documents and remittances

(1) Accounting policies and procedures establish the requirements for the preparation and verification of accounting source documents, data entry in the accounting information system, inventory of accounting records and document retention. Requirements are also set forth regarding due dates for the submission of documents and reports.
(2) The responsibilities of employees of accounting entities are determined in job descriptions.
(3) Document verification requirements are established in accounting policies and procedures, which specify the persons responsible for verifying the following:
1) the document correctly reflects the economic transaction;
2) quantities, prices and other terms contained on the document correspond to contracts that are in place;
3) the transaction is lawful;
4) the transaction corresponds to the budget;
5) transaction data presented on the document has been verified according to document verification requirements and approved by an authorised person.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(4) Employees of the accounting entity ensure the verification of the following data on the documents and in preparation of transfer documents and correct entry thereof in the accounting information system:
1) consistency of transaction with budget implementation monitoring principles;
2) correctness of accounts, trading partner, function, source, cash flow and other accounting item codes;
3) due date and transaction amounts;
4) accrual period;
5) data on transaction counterparty;
6) in case of invoices, compliance with the Value-Added Tax Act;
7) whether the particular goods, services or other benefits have not already been paid for.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(5) Document verification requirements must ensure the separation of the authorised person (with right of signature) and employee of the accounting unit. The head of an agency designates the authorised person(s) within the scope of their authority. Each source document must be signed by both the authorised person and the employee of the accounting unit.
[RT I 2010, 77, 591 - entry into force 22.10.2010]
(6) If possible, two individuals are involved in making remittances. In such cases, rights to perform electronic transfers are distributed in such a manner that one person alone cannot perform transfers. The person entering the transfer and the person accepting the transfer must be different individuals. Cash register payout orders must be approved by another person in addition to the cashier.
(7) Payment terms must generally allow for payment within 14 to 30 days after receipt of goods, services or other benefits because the transferor must have time to properly verify the source documents and plan its future cash flows.
(8) Making prepayments is avoided where possible.
(9) The following are deemed to be signatures of accounting source documents:
1) hand-written signature on a paper document;
2) digital signature;
3) sign-off or approval granted in a document processing information technology system if it can be retained electronically and if the person signing off or approving and date thereof can be identified during the retention period of the document;
[RT I 2010, 77, 591 - entry into force 22.10.2010]
(10) Accounting entities make remittances on the due date.
[RT I, 15.12.2011, 1 - entry into force 01.01.2012]

Chapter 5 ECONOMIC TRANSACTIONS WITHIN THE PUBLIC SECTOR 

§ 16.  General principles of accounting for economic transactions within the public sector

(1) Assets, liabilities, income and expenses within the public sector are differentiated on the basis of trading partner code.
(2) Trading partner codes are formed as follows: codes beginning with 001-799 are assigned to the public sector and related entities and codes beginning with 800-999 are assigned to other entities. Codes 001-799 indicate a group of public sector entities.
(3) The fourth digit of the code indicates the public sector or related entity type:
1) 0 - state accounting entities and units thereof;
2) 1 - local government entities and sub-entities thereof;
3) 2 - other public legal persons within the general government sector;
4) 3 - foundations, non-profit associations and subsidiaries within the general government sector;
[RT I 2010, 77, 591 - entry into force 22.10.2010]
5) 4 - subsidiaries not part of the general government sector;
[RT I 2010, 77, 591 - entry into force 22.10.2010]
6) 5 - public legal persons not part of the general government sector and foundations and non-profit associations not part of the general government sector under controlling influence;
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
7) 6 - associates;
8) 7 - foundations and non-profit associations under significant influence.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(4) Other ownership stakes have not been assigned separate trading partner codes and are recorded using trading partner codes beginning with three-digit code 800-999.
(5) For consolidation it is necessary that invoices, memos and other source documents are prepared in a manner enabling trading partners to understand on which accounts and in which reporting period the document issuer has recorded the transaction. Documents must also indicate to trading partners the trading partner code of the document issuer.
(6) Any transmission of assets, liabilities, income and expenses between units of state accounting entities, including within one accounting entity and between units of different accounting entities, as well as between the sub-entities of local government entities are referred to as transfers. The internal transfers of a state accounting entity are eliminated in the preparation of the financial statements of state accounting entities. Transfers between all units of state accounting entities are eliminated in the preparation of consolidated financial statements of the state. Financial statements of local government entities are prepared by eliminating the transfers between sub-entities of local government entities.

§ 17.  Transfers involving the state budget

(1) Funds paid and received through the e-Treasury information system are accounted for as bank account movements or transfers. Payments and receipts are accounted for as bank account movements in such e-Treasury accounts where units of state accounting entities are entitled to use the account balance to incur imputed and transferable expenses and the balance of which is automatically carried forward to the new budget year (grants, business income, guarantees). Other receipts and payments are accounted for as transfers.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(2) If a unit of state accounting entity has a cash register, the state accounting entity must enact cash register rules, including the maximum limit for the cash register, procedure for depositing cash on the e-Treasury bank account and requirements for the documentation, reconciliation and security of the cash register.
(3) If a unit of state accounting entity has been authorised by the Ministry of Finance to use a separate bank account, it must include the bank account balance in its balance sheet. The transfer of the account balance to the e-Treasury bank account and the presentation of such accounts in the report on the implementation of the state budget are agreed with the Ministry of Finance.
(4) The operating expenses of a unit of state accounting entity are typically recorded as follows:
1) the unit of state accounting entity records the following entry with an accrual-based date of the transaction: Debit Operating Expenses (account categories 4, 5, 6), Debit VAT Expense (account 601000), if the unit is not entitled to deduct input VAT, or Debit Input VAT (103701), if the unit is entitled to deduct input VAT; Credit Accounts Payable (201000);
2) on the date that payment is made, the unit of state accounting entity records the following entry: Debit Accounts Payable (201000); Credit Transfers from the Budget (700000, income account) or Credit Bank Accounts (account group 1001);
3) The Ministry of Finance records the following entry on the date of payment: Debit Transfers from the Budget (710000, expense account) or Debit Customer Funds (203630); Credit Bank Accounts (account group 1001), if the beneficiary of the payment is not another unit of state accounting entity, or Credit Transfers of Receipts to the Budget (700001, income account) or Credit Customer Funds (203630), if the beneficiary of the payment is another unit of state accounting entity.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(5) The acquisition of non-current assets of a unit of state accounting entity is typically recorded as follows:
1) the unit of state accounting entity records the following entry with an accrual-based date of the acquisition of non-current assets: Debit Non-current Assets (account category 15); Debit VAT Expense (601002) or Input VAT (103701); Credit Accounts Payable for Non-current Assets Acquired (201010);
2) in the Accounts Payable group, the special account Accounts Payable for Non-current Assets Acquired is used (201010) in order to obtain information for the correct accounting for the acquisition of non-current assets in the statement of cash flows;
3) if an invoice contains both operating expenses and non-current assets, the portion of operating expenses with VAT included is recorded on account 201000 the portion of non-current assets with VAT included is recorded on account 201010;
4) if the accounting software only permits one accounts receivable account to be used per invoice, the accounts receivable account is selected depending on which amount is higher;
5) on the date that payment is made, the unit of state accounting entity records the following entry: Debit Accounts Payable for Non-current Assets Acquired (201010); Debit Accounts Payable for Goods and Services Purchased (201000); Credit Transfers from the Budget (700000, income account) or Credit Bank Accounts (account group 1001);
6) The Ministry of Finance records an entry on the date of payment pursuant to subsection (4) 3) of this section.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(6) The expenses of a unit of state accounting entity are typically recorded as follows:
1) the unit of state accounting entity records the following entry with an accrual-based revenue recognition date: Debit Taxes, State Fees and Fines Receivable (account group 1020) or Receivable for Goods and Services Provided (account group 1030); Credit Income from Operations (account group 3); Credit VAT (203001), if the recipient is a taxable person for VAT and the income is subject to VAT;
2) on the date that income is received, the unit of state accounting entity records the following entry: Debit Transfers of Receipts to the Budget (710001, expense account) or Debit Bank Accounts (account group 1001); Credit Receivables (account group 1020 or 1030);
3) The Ministry of Finance records the following entry on the date of receipt: Debit Bank Accounts (account group 1001), if the payer is not another unit of state accounting entity, or Debit Transfers from the Budget (710000, expense account) or Debit Customer Funds (203630), if the payer is another unit of state accounting entity; Credit Transfers of Receipts to the Budget (700001, income account) or Credit Customer Funds (203630).
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(7) As units of state accounting entities transfer all of their income to the state budget and receive funds from the state budget to meet all expenses incurred, the accrual-based surplus of a unit of state accounting entity must always be zero (except for the Ministry of Finance). Transfers are made during the reporting period on the cash basis. At the end of the reporting period after all accrual-based entries are recorded, the surplus of a unit of state accounting entity is reduced to zero as follows:
1) if there is a surplus before adjustment, the entry at the start of the year must be as follows:
Debit Accrual-based Transfers to the Budget (710002, expense account); Credit Accrual-based Transfer Liability (203500);
2) if there is a deficit before adjustment, the entry at the start of the year must be as follows: Debit Accrual-based Transfer Asset (103500); Credit Accrual-based Transfers from the Budget (700002, income account);
3) The Ministry of Finance makes the corresponding entries in accordance with the accrual-based transfers account balance, as presented in the trial balance of the unit of state accounting entity.

§ 18.  Formation, dissolution and restructuring of units of state accounting entities

(1) [Repealed - RTL 2010, 2, 24 - entry into force 11.01.2010]
(2) Entities formed or merged recognise received assets and liabilities by using as a basis their carrying amount in the balance sheet of the transmitting entity on the date of transmission. If units of state accounting entities are dissolved on dates other than the start of a new fiscal year, the balances of income and expense accounts accumulated from the start of the fiscal year are transmitted in the same manner. Entries are recorded in the accounting software on the date of transmission and receipt whereby the transmitter's account balances are reduced to zero. The recipient accounts for the transmitted account balances on its own accounts from the same date.
(3) If assets and liabilities are transmitted as a non-monetary contribution to the equity or endowment of another legal entity, a financial investment is recorded in the transmitter's balance sheet (account group 150, cash flow code 17) at the lower of carrying amount and fair value of transmitted assets (except in cases where revaluation is required to adjust asset values pursuant to § 45 of the general rules, in that case the transmission is recorded at fair value). If another unit of state accounting entity exercises control over the ownership interest, the transmitter thereafter transmits the ownership interest from its balance sheet as a transfer to the unit of state accounting entity exercising control.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(4) The recipient of a non-monetary contribution recognises transferred assets at fair value pursuant to subsections 41–45 of this section.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(41) The carrying amount of assets in the transmitter's balance sheet is deemed fair value if all of the following criteria are met:
1) the assets are subsequently required for performing public services;
2) the services listed in article 1 of this subsection are not classified as being services of general economic interest;
3) there is no active market for assets with the same uses;
4) the purpose of the transmission is not leaseback;
5) the recipient of assets is a company founded or fully owned by one person, including the state, or the recipient of assets is a foundation or non-profit association founded or fully owned by public sector entities.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(42) The revalued carrying amount of assets is used as a basis in subsection 41 of this section if revaluation is required under § 45 of the general rules, and the written-down carrying amount is used as a basis if the assets require write-downs under § 42 (5) of the general rules. The transmitter of the assets records the revaluation or write-down in advance.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(43) Fair value is deemed to be market value, subject to the terms of the contract concluded, if the assets are subsequently required for performing public services and the purpose of the transmission is leaseback.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(44) Fair value is deemed to be market value if the assets are not subsequently required for providing public services.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(45) In cases other than those referred to in subsections 41–44 of this section, market value is used as a basis if active market exists for the assets and replacement cost method is used if no active market exists.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(5) If no shares are received in consideration or if a non-monetary contribution for other reasons cannot be accounted for as a recognition of ownership interest, § 44 (3) of the general rules is applicable in case of a transfer of assets to another legal entity free of charge. If assets are provided for use free of charge, § 44 (4) of the general rules is applicable.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(6) Transactions conducted outside the ordinary course of economic activities between an entity exercising controlling influence over an entity or exercising rights of founder or membership rights and an entity under controlling influence, as well as entities under collective controlling influence, are accounted for in a similar manner as provided in subsection 3 of this section through change in ownership interest or equity rather than through the statement of financial performance.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]

§ 19.  Transfers between units of state accounting entities

(1) If a unit of state accounting entity transfers assets, liabilities, income or expenses to another unit of state accounting entity, their transfer may occur as follows:
1) with payment of cash to account for the transaction as implementation of the state budget - in that case a receivable or liability is recognised in the net amount (assets and expenses transferred less liabilities and income transferred) on an accrual basis in account 103000 (recipient of cash) or 201000 (payer of cash) and such account is closed on the date of remittance;
2) as a non-cash transfer between units of state accounting entities - in that case the net income received (account 700010) or net expense (account 710010) from the transfer is recognised (assets and expenses transferred less liabilities and income transferred).
(2) Before making a transfer, the transferring entity must ensure that assets and liabilities are valued in accordance with general rules and the recipient will not incur any additional income or expenses upon receipt.
(3) Assets and liabilities are transferred together with corresponding balance sheet balances. Recipients must record the same balance sheet balances that were recorded in the transferring entity's balance sheet before the transfer. If property, plant and equipment or intangible assets are transferred, the cost and depreciation are transferred separately and the recipient records in the same manner the transferred cost and depreciation. If a receivable is transferred, the corresponding allowance for doubtful debts must also be transferred and the recipient separately records the receivable and its doubtful debt allowance.
[RTL 2009, 4, 54 - entry into force 17.01.2009]
(4) Upon transfer, the transferring entity's accounting entries, dates thereof and the transferring entity's trading partner code must be indicated and the recipient must record acceptance entries with the same date by using the correct accounts and the transferring entity's trading partner code.

Chapter 6 INCOME FROM OPERATIONS 

§ 20.  Taxes

(1) State tax revenue is recognised in account category 30 in the accounts of the tax authority collecting the tax. If tax revenue must be passed through pursuant to law, the pass-through tax expense is also recognised upon recognition of tax revenue (account group 6015). Recognition of the expense is subject to adjustment by the receivables against which an allowance of doubtful debts is recorded during the period (account group 6012), by which the pass-through expense is reduced. Recipients of pass-through taxes also recognise tax revenue in account category 30.
(2) Tax revenue is accounted for on accrual basis. Receivables are recognised when the amount receivable can be reliably estimated. Taxes receivable based on tax returns are recognised when tax returns are received, indicating tax revenue in the period that the tax return relates to. If such accrual period is already closed and the financial statements of the period have already been prepared, the revenue is recognised in the first available open period.
(3) If the database of tax returns and accounting are different, the tax revenue and receipts data may be entered in the accounting software as monthly aggregate entries depending on the dates that the reports are completed. Upon completion of reports, the balances of outstanding and prepaid taxes are also determined by the end of the month and balances of taxes receivable and prepayments are adjusted.
(4) Tax revenues are recognised with an accrual-based entry: Debit Taxes Receivable (account group 1020); Credit Tax Revenue (account category 30).
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(5) If a tax authority records receivables as paid through prepayment accounts opened for customers, it records the receipts on prepayment account 200099 by deducting from this account on the date that the receivable is classified as paid (generally the date when the tax is due pursuant to law).
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(6) Collectible tax revenue passed through under the law is recognised by the tax authority on an accrual basis as revenue in account group 6015 and a liability in account group 2030.
[RT I, 13.11.2012, 7 - entry into force 01.01.2013]
(7) The entity passing on taxes drafts a memo to the recipient, indicating the pass-through net tax liability that is not passed on as at the end of the reporting period, which is calculated by adding total receipts not passed on and deducting total tax prepayments received from the total collectible receivables included in the tax authority's balance sheet that have not been received by the end of the reporting period. A monthly pass-through tax revenue memo is sent to the recipient, which uses it as a basis for recognising revenue in account category 30 and a receivable in account group 1020 by indicating the tax authority as trading partner.
[RT I, 13.11.2012, 7 - entry into force 01.01.2013]
(8) The tax authority indicates a reduction in liability (Debit account group 2030) and a reduction in the receivable of pass-through tax recipient (Credit account group 1020 on the date of remittance of the pass-through tax.
(9) Taxes collected based on decisions by the tax authority are recognised as tax revenue upon expiry of the term for filing challenges or appeals. Before such term the relevant receivables are accounted for off-balance sheet or, if received, as prepaid taxes received.
[RTL 2010, 2, 24 - entry into force 11.01.2010]

§ 21.  State fees

(1) An entity recognises state fee revenue in account group 320 if it has performed an operation for which the fee was due. The revenue is recognised on an accrual basis on the date of the fee-based operation. If operations and receipts are analytically tracked separately, then revenue may be recognised once per month with an aggregate entry for the operations performed in the given month.
(2) In case of low state fee rates (up to 100 euros per operation) or if the duration from receipt of fee until the operation is performed is usually short (up to one month) or if it is difficult to determine the date of the fee-based operation, the state fee revenue may be recognised on a cash basis. In that case, the selection of cash basis accounting must be justified in accounting policies and procedures and an explanation is provided as to how the entity ensures that fees are paid for all operations.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(3) If the number of fee-based individual operations is so high that recording in accounts is insufficient for verification that all fees are paid, a specialised information system is used to account for state fees, which must also enable outputs necessary for recording accounting entries, including support for correct use of trading partner codes.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]

§ 22.  Fines

(1) Fine revenue is recognised in a similar manner as state fees on an accrual basis in account group 3880 in the income of the state accounting entity that imposed the fine. Fines are received in the bank account designated for that purpose where they are classified by reference numbers of recipient entities.
(2) Fines are only recognised as a receivable in the balance sheet in account 102090 and revenue in account group 3880 on the date of issue (imposition) if the revenue is deemed collectible. Otherwise, fines are accounted for off-balance sheet until collected. The specific policies and procedures of revenue collectibility evaluation are detailed in the accounting policies and procedures of the state accounting entity that collects the revenue.
[RTL 2010, 2, 24 - entry into force 11.01.2010]
(3) If the number of fines is so high that recording in accounts is insufficient for verification of fines imposed and receipt thereof, a specialised information system is used to account for fines, which must also enable outputs necessary for recording accounting entries, including support for correct use of trading partner codes.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(4) [Repealed - RTL 2007, 79, 1369 - entry into force 29.10.2007]

§ 23.  Sale of goods and services and other income

(1) Revenue from sale of goods and services is recognised in account groups 322 and 323. Other income, including gains or losses from the sale of assets, is recognised in account category 38. Finance income is recognised in account category 65. ASBG 10 is used as a basis for determining the timing of revenue recognition and amount of revenue.
(2) Revenue is generally recognised based on a claim document on an accrual basis with the following entry: Debit Receivables (account group 1030 or 102080, 102091, 102095); Credit Revenue (excluding VAT) and Credit VAT (203001), if the recipient of revenue is obligated to add VAT to the sales price.
(3) Revenue of state accounting entities from the sale of goods and services is generally received in its designated account in e-Treasury where it is allocated to recipients based on reference number. Interest receivable on tax arrears are paid into the tax authority's account. The recipient records the following entry on the day of receipt: Debit Revenue Transfers to the Budget (710001); Credit Receivables (account group 1030 or 102080, 102091, 102095).
(4) Pass-through fees for the use of natural resources are accounted for in the same period as the revenue is recognised on an accrual basis in account group 6015, recognising a liability for its transmission in account 203080. A memo is issued to the recipient for the accrual-based recognition of the receivable and pass-through revenue.
(5) The principal of hire purchase receivables related to privatisation contracts for land and other property is recorded in accounts 103250 (current portion) and 153250 (non-current portion).
[RT I 2010, 77, 591 - entry into force 22.10.2010]
(6) Revenue and receivable are recognised in the balance sheet when the right to receive payment has been established and revenue is deemed collectible. Otherwise, the revenue and receivable are accounted for off-balance sheet in accounting records. The policies and procedures of revenue collectibility evaluation and accounting for off-balance sheet revenue and receivables are established in the accounting policies and procedures of the state accounting entity that collects the revenue.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]

Chapter 7 Grants received and awarded 

§ 24.  Types of grants

(1) Grants are funds received by public sector entities (grants received) not directly in exchange for goods and services, as well as funds awarded by public sector entities (grants awarded) not directly in exchange for goods and services. Grants received and awarded between units of state accounting entities are generally accounted for as transfers, except for funds classified as co-financing of foreign grants, which are accounted for as grants.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(2) Grants are classified as follows:
1) Social benefits - paid to natural persons, excluding business grants;
2) Government grants - awarded for a specific purpose, as well as grants received and awarded under other criteria, including business grants to natural persons. Types of grants are:
a) domestic grants - government grants received from and awarded to residents, incl. other public sector entities, except for foreign grants passed through them; co-financing of foreign grants is a special type of domestic grants - grants awarded by Estonian public sector entities that are supplemental to foreign grants paid by European Union funds due to conditions for granting aid requiring Estonian public sector co-financing up to a certain extent of the total aid; co-financing may occur as financial support or as classification of a public sector entity's operating costs as co-financing;
b) foreign grants - grants from non-residents, including international organisations;
3) Non-targeted grants - grants awarded to legal entities without specifying a purpose or attaching criteria that are used by recipients at their discretion.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(3) The State Budget Act refers to grants and non-targeted financing that are awarded as allocations and such received financing as support. The general rules define allocations based on the ASBGs.
(4) Government grants are classified as grants related to income and assets. Grants related to assets are grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire certain non-current assets.
(5) For improved monitoring of the flow of grants and for performing eliminations required for consolidation of financial statements, grants and pass-through grants are distinguished on the income and expense accounts. Grants are classified as pass-through if received for further financing as opposed to covering one's own operating costs or acquisition of assets. In case of pass-through grants, income from aid received equals the cost of aid that is passed on.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]

§ 25.  General principles of accounting for grants

(1) Grants are accounted for in the following manner by public sector entities that prepare their financial statements in accordance with the accounting principles generally accepted in Estonia: grants are recognised as income in the period that operating expenses are incurred or non-current assets are acquired, unless conditions of the government grant subject it to substantive risk of recovery or failure to collect. If substantive risk of recovery or failure to collect exists, the grants are recognised as income when such risk ceases to exist. Public sector subsidiaries that prepare their financial statements in accordance with International Financial Reporting Standards account for grants using the gross method based on the relevant standards.
[RT I, 15.12.2011, 1 - entry into force 01.01.2012]
(2) Grants are initially recognised in the balance sheet upon transfer or collection of the funds or on the date that receivables, payables, income and expenses related to the grants are recognised pursuant to subsection (1) of this section. Obligations to award grants contractually undertaken and grants receivable are first accounted for as contingent liabilities and receivables (off-balance sheet in the accounts 911010 and 912010).
[RT I, 15.12.2011, 1 - entry into force 01.01.2012]
(3) Granting entities and pass-through entities expense grants awarded and passed through (pass-through entities also recognise income) in the same periods as the final recipients of grants. The award and pass-through of grants related to assets is expensed (pass-through entities also recognise income) in the period that the final grant recipient recognises the acquisition of non-current assets, regardless of whether the grant recipient concurrently recognises the received grant in the liabilities account category 257 or income account group 3502.
[RT I, 15.12.2011, 1 - entry into force 01.01.2012]
(4) If a grant is established to be payable periodically (social benefits, including pensions), the grant is recognised as income or expense in the month that it was for.
(5) If co-financing is not paid to the recipient of the grant or contracting authority but rather the co-financier's operating costs or acquisition of non-current assets are deemed co-financing, it is accounted for according to the economic substance of the actual expenditure instead of co-financing.
(6) If the granting entity and recipient are both public sector entities, they must agree upon the grant type and accounts and dates on accrual basis to be used in recording entries. If a pass-through entity recognises a grant as income and expense in its statement of financial performance, the granting entity and final recipient in all cases classify the pass-through entity as trading partner and the pass-through entity indicates the granting entity as trading partner in income and the final recipient as trading partner in expenses.
(7) If the granting entity or pass-through entity and final recipient are both public sector entities and the final recipient has outstanding receivables from or payables to the granting entity or pass-through entity related to grants at the year-end, the final recipient will submit to the granting entity or pass-through entity a memo concerning the receivables, liabilities, income and expenses related to grants as at the year-end by 31 January of the following year.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(8) If a granting entity or pass-through entity awards a grant to a recipient that is a unit of state accounting entity in full or in part for reimbursement of costs without requesting the corresponding source documents and such costs are initially accounted for as part of other budget types, the recipient will issue an accounting statement enclosed to the request for payment, calculating the portion of undocumented costs paid on account of the grant and its co-financing, break them down on an estimated basis into labour costs and operating costs and record the change in budget type at the date of the request for payment.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(9) A unit of state accounting entity not adding budget classification codes to payments in e-Treasury records a change in budget type on the basis of the accounting statement specified in subsection (8) of this section as follows:
1) debit 508000 (labour cost) and debit 555000 (operating cost) and credit 710001 (transfers to treasury) with grant and co-financing budget type, adding the grant code;
2) credit 508000 (labour cost) and credit 555000 (operating cost) and debit 710001 (transfers to treasury) with the budget type of previously incurred expenses.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(10) If a unit of state accounting entity adds budget classification codes to payments in e-Treasury, it will make a transfer between its own accounts in e-Treasury on the basis of the accounting statement specified in subsection (8) of this section and it will be recorded as follows:
1) debit 508000 (labour cost) and debit 555000 (operating cost) and credit 100100 (transfers to treasury) with grant and co-financing budget type, adding the grant code;
2) credit 508000 (labour cost) and credit 555000 (operating cost) and debit 710001 (transfers to treasury) or debit 100100 (fund balance with treasury) with the budget type of previously incurred expenses.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]

§ 26.  Grants related to income

(1) Grants related to income are recognised as revenue in the account group 3500.
[RT I, 15.12.2011, 1 - entry into force 01.01.2012]
(2) If grants have been collected but no expenses related to such grants have yet been incurred, the collected funds are accounted for as a prepayment (203850 and 203855). If expenses related to conditions of the grant have been incurred and there is no substantive risk of failure to collect the grant, however the grant has not yet been collected, the grant is recognised as income and a receivable (103550 and 103555).
[RT I, 15.12.2011, 1 - entry into force 01.01.2012]
(3) Grants related to income received and awarded may be immediately recognised as revenue upon receipt and immediately expensed upon disbursement if the contractual amount is lower than the capitalisation threshold for non-current assets as provided in § 41 (1). In case of grants within the public sector, parties will agree upon an accounting method beforehand.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]

§ 27.  Grants related to assets

(1) Public sector entities preparing financial statements in accordance with the accounting principles generally accepted in Estonia record grants related to income as revenue in account category 3502. Public sector entities whose main purpose is to provide its owner with a profit and that prepare financial statements in accordance with International Financial Reporting Standards initially recognise grants received as a liability in account group 257 and recognise revenue (account group 351) over the estimated useful life of the non-current asset.
[RT I, 15.12.2011, 1 - entry into force 01.01.2012]
(2) Grants are recognised as revenue in account group 351 over the course of the useful life of the acquired non-current assets, adhering to the matching principle. Analytical records are kept on the non-current assets funded by grants in order to recognise deferred revenue on the grants. The accounting records indicate the cost and accumulated depreciation of the non-current assets, grants received and accumulated depreciation and granting entity and source code. The portion of the carrying amount of non-current assets that are funded by grants must match the carrying amount of the grants at the end of each month.
(3) Deferred income from grants is recognised by initially recording all transactions involving the non-current assets in a particular month and the depreciation of the non-current assets is calculated. Thereafter, entries are recorded to recognise deferred revenue on the grants. Once the non-current assets are fully depreciated, the cost and accumulated depreciation of the assets funded by grants are derecognised from the balance sheet. On the month of sale or derecognition of non-current assets that have not been fully depreciated, the grant is recognised as revenue in full and its accumulated depreciation is derecognised from the balance sheet.
(4) If a grant has been received but assets have not yet been acquired, the funds received are recognised on the balance sheet account either as a current (203856 and 203857) or non-current (account category 257) liability. If non-current assets have been acquired and there is no substantive risk of failure to collect the grant, however the grant has not yet been collected, the grant is recognised as a liability (account group 257) or revenue (account group 3502) and receivable (balance sheet accounts 103556 and 103557).
[RT I, 15.12.2011, 1 - entry into force 01.01.2012]
(5) If a public sector entity has a firm intention to implement a certain project by awarding a grant, is planning ongoing annual grants and has raised a valid expectation in the grant recipient to receive the grant, the grant award liabilities are recognised in the same period that the grant recipient recognises the acquisition of non-current assets, as grants related to assets (D 450200 C 203550 current liability, C 253550 non-current liability). If the grant recipient is a public sector entity, it concurrently recognises a grant receivable (D 103556 short-term receivable, D 153556 long-term receivable C 350200 or C 257000). In order to recognise grants, the grant recipient provides the granting entity with data as of at least each quarter-end concerning the acquisition of non-current assets during the respective quarter. If it is determined that the grant award is cancelled, the receivables and liabilities accounted for to-date are withdrawn. Grants receivable and payable that are based on a firm intention for ongoing financing of a project rather than a grant agreement are disclosed in the annual report. Disclosure is also provided on cases where such firm intentions did not materialise.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(6) If a foreign aid measure provides for the temporary direction of funds to an implementing entity for issuing or guaranteeing investment loans, the foreign aid pass-through entity recognises the grant as a pass-through receivable from the implementing entity in account 153780 and concurrently as foreign aid revenue in account group 3502. The implementing entity recognises funds received in account 257800. Receivables and liabilities are not discounted if the conditions of the measure provide for income received from the implementation of such measure, incl. interest or guarantee fees, regardless of whether the income remains with the implementing entity or must be classified by the implementing entity as temporary funds.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]

§ 28.  Pass-through grants

(1) Public sector entities engaged in passing on grants recognise grants on the accrual basis in their revenue and expenses pursuant to § 25 (3) of the general rules. Pass-through entities use the following income and expense accounts: income accounts 350010, 350030, 350050, 350210, 350230, 350250 and expense accounts 450010, 450030, 450050, 450210, 450230, 450250.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(2) If funds received under grants are disbursed to the pass-through entity, the pass-through entity accounts for such funds as a prepayment (account group 2038) until the revenue and expense recognition period. If a pass-through entity disburses a grant to a recipient as prepayment, it will recognise it in account group 1038. If a pass-through entity accepts a recipient's report on expenditures incurred, it will recognise revenue from the granting entity and expense to the grant recipient and either recognises a receivable from the granting entity (account group 1035) or reduces the prepayment received from the granting entity (account group 2038) and recognises a payable to the grant recipient (account group 2035) or reduces the prepayment made to the grant recipient (account group 1038) in the same period that the recipient's expenditure was incurred.
[RT I, 15.12.2011, 1 - entry into force 01.01.2012]
(3) If a pass-through entity assumes liability to the granting entity for compliance with contract terms and targeted use of funds, the pass-through entity recognises a recovery receivable if a breach of contract is found (accounts 103650 and 103655) from the grant recipient and a recovery payable (accounts 203650 and 203655) to the granting entity. In addition, revenue from grants (accounts 350060, 350070, 350260, 350270) and grant expenses (accounts 450060, 450070, 450260, 450270) are reduced.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]

§ 29.  Non-targeted financing

(1) Non-targeted financing is recognised as revenue by the grant recipient in account group 352 and expensed by the granting entity in account group 452 at the time that the grant is received.
(2) [Repealed - RTL 2004, 104, 1685 - entry into force 06.08.2004]

§ 30.  Non-monetary grants

(1) Non-monetary grants are classified as follows:
1) grants in a connected transaction involving three parties where the granting entity or pass-through entity remits funds directly to the supplier of goods and services from which the grant recipient receives goods and services;
2) grants whereby a granting entity delivers goods or services to a grant recipient and it does not result in a sale by the supplier.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(2) If a non-monetary grant entails the granting entity or pass-through entity disbursing funds directly to the grant recipient's supplier, the grant is recognised on the basis of a memo by the granting or pass-through entity in a manner as if the funds were moved through the grant recipient to the supplier (except for recording the bank account movement; instead, the grant recipient on the payment date settles the payable to the supplier and receivable to the granting entity or pass-through entity or the prepayment received from the granting or pass-through entity). Upon disbursement of a grant to a supplier, public sector pass-through entities must notify the grant recipient of the acceptance of a request for payment, revenue recognition period of the grant and the remittance by the 5th day of the month following the remittance date.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(3) Non-monetary grants are recognised at fair value of goods and services received. If the fair value of goods and services funded by a grant cannot be reliably measured, no accounting entries are recorded. Non-monetary grants received from other public sector entities pursuant to § 30 (1) 2) are accounted for pursuant to § 44 (3) or (4).
[RTL 2007, 79, 1368 - entry into force 29.10.2007]

Chapter 8 OPERATING EXPENSES 

§ 31.  Labour costs

(1) Labour costs are recognised on an accrual basis in account category 50 in the period when they were incurred. The Estonian Tax and Customs Board trading partner code is recorded in account groups 1037 and 2030 in balance sheet accounts. Codes of natural persons are recorded as trading partner codes in other asset and liability accounts related to labour costs, as well as salary cost (account group 500) and tax expense (account group 506).
(2) Only the declared tax liability is entered in account group 2030 (tax liabilities). The accounts of this group must equal the accrual-based balances of taxes receivable as recorded in the Estonian Tax and Customs Board's account records. If a taxable person has a prepaid balance for any tax, it must be reflected in account group 1037, which must equal the prepaid balance indicated in the Estonian Tax and Customs Board's account records.
(3) Taxes withheld on labour costs are recognised as a liability in account group 2030 in the period in which the tax obligation was incurred (distributions were made or taxes were due on fringe benefits). If accrued salary is paid out in the following month, the taxes withheld are allocated from the salary payable account group 202 to the taxes payable account group 2030 in the month that the employee's salary was paid. Entries can be made on each payment date or as aggregate entries in accordance with the tax return prepared for the given month for income and social tax, contributions to mandatory funded pension and unemployment insurance premiums.
(4) Tax expenses related to labour costs are recognised on an accrual basis in the period in which they were incurred. If salaries are paid in the following month, entries for tax expenses are reallocated similarly to entries for taxes withheld from account group 202 to account group 2030. Entries in the accounting month (when expense is incurred): Debit Social Tax Expense (account 506000); Credit Accrued Social Tax Liability (account 202001); Debit Unemployment Insurance Premiums (account 506040); Credit Accrued Unemployment Insurance Premiums Liability (account 202003). Entries in the month payments are made: Debit Accrued Social Tax Liability (account 202001); Credit Social Tax Liability (account 203010); Debit Accrued Unemployment Insurance Premiums Liability (account 202003); Credit Unemployment Insurance Premiums Liability (account 203030).
(5) Actual holiday pay and tax expense thereon are allocated to these months for which it was accrued. If the payroll software does not recalculate the unpaid holiday pay liability on a monthly basis, prepayment accounts 103930, 103931 and 103932 are used to handle payments of holiday pay for future periods. If the payroll software operates under the principle of monthly recalculation of unpaid holiday pay liabilities, the holiday pay liability account 202010 is debited to reflect the payment of holiday pay.
(6) The liability for unused holiday entitlement and unpaid holiday pay may be re-evaluated at the end of each month or annually at the year-end date. The adjustment of holiday pay and associated tax liabilities in account 202010 is recognised as an expense of the reporting period ended (decrease as a reduction in expense).
(7) Benefits related to the termination of employment contracts are generally expensed at the time of termination regardless of the actual payment date. If an employer had previously disclosed employee-related liabilities that required provisioning, the principles set forth in ASBG 8 apply.

§ 32.  Other operating expenses

(1) Generally only expenses related to the operations of a unit of state accounting entity may be classified as operating expenses. Consideration paid on behalf of another unit of state accounting entity or other entities is deemed as a pass-through cost.
(2) It is permitted to not allocate operating expenses of various units of state accounting entities between such entities if the amounts involved are immaterial and allocation is complex and time-consuming or the allocation formula is difficult to justify, as well as when prohibited by legislation.
(3) The following accounting principles apply to pass-through costs:
1) pass-through costs are recognised as expenses of the entity whose activities they relate to;
2) the pass-through entity recognises pass-through costs as a receivable from the entity to which the cost will be passed on if it is payable by such entity or as a transfer in account 710010 if the cost is not payable by such entity;
3) the pass-through entity recognises the cost based on its economic substance in an expense account or investment account using the trading partner code of the initial issuer of the claim and a negative entry in the same account using the trading partner code of the entity the cost is passed on to.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]

§ 33.  Accounting for taxes, state fees and fines incurred

(1) Public sector entities record non-refundable VAT expense on operating expenses in account 601000 and on acquisition of non-current assets in account 601002. VAT expense on pass-through costs may be recorded in account 601001 to differentiate it.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(2) Other non-refundable expenses such as taxes, state fees and fines (except for taxes on labour) are also recorded in account group 6010.
(3) If an acquisition of inventories or non-current assets is aimed at passing it on in kind to another entity (other entities) and the acquirer is unable to deduct input VAT, the entity acquiring inventories or non-current assets expenses the associated VAT at the time that inventories or non-current assets are acquired or paid for, whichever is earlier, and will not pass it on to another entity together with the inventories or non-current assets.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(4) [Repealed - RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(5) [Repealed - RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(6) If a public sector entity is a taxable person for VAT, it records VAT in account 203001 and input VAT in account 103701. In this case additional parameters (sub-accounts or separate VAT parameters) need to be used to ensure the correct preparation of the VAT return. Accounts 203001 and 103701 are closed at the end of each month. Input VAT is offset against VAT payable through an entry between such accounts and VAT payable is moved to account 203000 or the refund VAT receivable at the end of the period is moved to account 103700.
(7) Taxes, state fees and fines that are unpaid but declared are recorded as a liability in account group 2030 and prepaid taxes, state fees and fines are recorded as current assets in account group 1037. The account group 2030 balances must equal at the end of each reporting period the account group 1020 balances of the Estonian Tax and Customs Board or the agency collecting the state fee.
(8) In case of state fees and fines, the payer of the fee or fine records in expenses and receivables the code of the entity performing the fee-based operation or issuer of the fine (not the Estonian Tax and Customs Board's code if the fee or fine is paid to a pooled account opened with the Estonian Tax and Customs Board).
(9) VAT subject to refund (except for input VAT) is recorded in account 103640 until collected (for instance, foreign VAT paid and refundable by the foreign country).

Chapter 9 ASSETS 

§ 34.  Financial investments

(1) Financial investments are accounted for based on ASBG 3 requirements.
(2) Financial investments are classified as short-term (maturing during the next financial year) or long-term in the balance sheet depending on their estimated maturity. Short-term financial investments are recorded in account group 101 and long-term financial investments are recorded in account group 151. Derivatives are recorded as short-term in accounts 103300 and 209000. Gains and losses on financial investments are recorded in account category 65.
(3) In addition, financial investments are classified as follows in the chart of accounts:
1) trading portfolio securities (shares, fixed income instruments and other securities) purchased with a view to reselling them at a short-term gain;
2) investment portfolio securities - investments of long duration in shares and other equity instruments (except for investments in subsidiaries and associates) and bonds and other debt instruments (except for held-to-maturity bonds);
3) held-to-maturity bonds;
4) derivatives;
5) other holdings - unlisted shares and ownership interest in international organisations.
(4) Securities and derivatives (except for held-to-maturity bonds) are measured at fair value. If there is no information on fair value, such securities are measured at cost less allowance for impairment. If cost is unknown, such securities are carried at zero.
(5) Ownership interest in public sector subsidiaries and associates representing less than 20% of voting rights is accounted for under the accounting principles for associates provided in § 35 of the general rules.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]

§ 35.  Ownership interest in public sector and related entities

(1) Ownership interest in public sector and related entities is recorded in account group 150 pursuant to ASBG 11 requirements.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(2) Balance sheets of state accounting entities in accordance with § 13 (6) and (7) of the general rules contain state ownership interest in the net assets of the following public sector entities, accounted for using the equity method:
1) foundations and non-profit associations;
2) subsidiaries and associates;
3) State Forest Management Centre (in the balance sheet of the Ministry of Environment).
(3) In 2004, ownership interest in entities under controlling and significant influence is accounted for using the equity method. From 2005, the accounting policy is amended as follows (with the exception of state accounting entities):
1) ownership interest in entities under controlling and significant influence acquired on or after 1 January 2004 is carried in separate financial statements (and separate trial balance) at cost, less any impairments;
2) ownership interest in entities under controlling and significant influence acquired on or before 31 December 2003 is carried in separate financial statements (and separate trial balance) at deemed cost, less any impairments; deemed cost is defined as ownership interest in the net assets of such entities as at 31.12.2003;
3) ownership interest in entities under significant influence is included in consolidated financial statements using the equity method.
(4) If the cost (or deemed cost) of ownership interest included in separate financial statements exceeds the net assets of the investee, which has been reduced by dividend distribution, losses or other reasons, the cost (or deemed cost) of ownership interest is written down to the total ownership in the entity's net assets. If the total ownership in the entity's net assets increases in a future period, the write-down is reversed up to the lower of cost (or deemed cost) of ownership interest and total ownership in the entity's net assets.
[RTL 2006, 11, 198 - entry into force 03.02.2006]
(5) Ownership interest in foundations and non-profit associations is accounted for as follows:
1) if a public sector entity exercises controlling influence over a foundation or non-profit association (generally in excess of 50% of voting rights), the ownership interest is recorded as 100%;
2) if a public sector entity holds significant influence over a foundation or non-profit association (generally 20-50% of voting rights), the ownership interest and financial investment are not included in the balance sheet (contributions to the investee's endowment are recognised as grants expense).
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(6) Foundations and non-profit associations with less than 20% of voting rights that are not included in the balance sheet are disclosed in the annual report with information provided similar to that relating to ownership interest.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(7) Public sector entities amortise goodwill arising from the acquisition of ownership interest over its estimated useful economic life in their consolidated financial statements. If the useful life of goodwill cannot be reliably estimated, it is deemed to be 10 years. As an exception, public sector entities that prepare their financial statements in accordance with International Financial Reporting Standards using the cost method, recording an impairment charge based on an impairment test if necessary.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]

§ 36.  Receivables and prepayments

(1) Receivables and prepayments are accounted for based on ASBG 3 requirements. Finance lease receivables are accounted for based on ASBG 9.
(2) Receivables and prepayments are included in the chart of accounts depending on their substance, classified as short-term and long-term, in current assets account groups 102 and 103 and non-current assets account groups 152 and 153.
(3) Loans and other receivables are measured in the balance sheet at amortised cost, allocating the nominal value into separate short-term and long-term portions, adjusted by other balance sheet accounts of the same account group.
(4) Long-term non-interest-accruing receivables are measured at present value, discounted at the rate of 4% per annum. In that case, interest income is recorded in account 658080.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(5) Gains and losses on translation of receivables denominated in foreign currencies are recorded in account 608000.
(6) If making a prepayment cannot be avoided, it is initially recorded when the relevant amount is paid. Issued and unpaid prepayment invoices are not accounted for. Prepaid expenses are expensed in the period for which the prepayment was made. As an exception for the simplification of accounting, deferred expenses may be expensed immediately if the amount of prepayment indicated on an invoice or memo is lower than the threshold for capitalising non-current assets as provided in § 41 (1). In case of transactions within the public sector, parties will agree upon an accounting method beforehand.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]

§ 37.  Valuation of receivables

(1) The collectibility of receivables is evaluated at least at each quarter end. The collectibility of each receivable is evaluated separately where possible. If this is not practical, an approximate method is used to evaluate receivables based on historical experience. Receivables are valued based on circumstances known at and after the balance sheet date until the preparation of financial statements that may impact the collectibility of receivables.
(2) When receivables are valued using the ageing method (except if a state accounting entity itself has specified a more accurate accounting policy in its accounting policies and procedures), receivables that are past due by:
1) 90-180 days are written down by 50%;
2) over 180 days are written down by 100%.
(3) Allowances are recorded in the balance sheet as negative amounts in their respective contra-accounts and in expenses depending on the type of receivable (doubtful taxes, state fees and fines receivable in account group 6012, doubtful other receivables in account group 605, doubtful interest receivable in account group 6580).
(4) If an allowance was recorded in the doubtful receivables account but it is later determined to be uncollectible, the receivable and its allowance in the corresponding contra-account are both derecognised. At that time, no incremental expense is incurred. A receivable is classified as uncollectible if there is no possibility of collecting the receivable or its collection costs exceed the estimated proceeds from collection. The accounting policies and procedures of state accounting entities specify who is authorised to confirm entries to classify receivables as uncollectible.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(5) [Repealed - RTL 2007, 79, 1369 - entry into force 29.10.2007]
(6) If a prior allowance for doubtful receivables estimate changes, it is accounted for as a change in expense in the period that the estimate changed. In case of collection of doubtful receivables, the previously recognised expense is reduced in the period of collection and concurrently the balance of the receivable itself and its contra-account are reduced.
(7) In case of a large number of receivables, the balance sheet method is used for the estimation of doubtful receivables whereby all receipts are initially only recorded in the receivables account (not in the contra-account). At the end of the reporting period, the balance of doubtful receivables is evaluated and an adjustment entry is made depending on whether the total amount of doubtful receivables increased or decreased compared to the prior period end.

§ 38.  Inventories

(1) Inventories are accounted for based on ASBG 4 principles. As a special requirement, non-refundable VAT arising from purchasing inventories and state fees are recorded in account group 6010. The fuel tax arising from purchasing inventories is capitalised in the cost of inventories.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(2) Inventories and prepaid inventory purchases are recorded in account group 108.
(3) Strategic inventories are accounted for in separate accounts. Strategic inventories are defined as mobilisation stockpiles pursuant to the Peacetime National Defence Act, state operation stockpiles pursuant to the Emergency Act and liquid fuel stockpiles pursuant to the Liquid Fuel Stocks Act.
[RTL 2009, 4, 54 - entry into force 17.01.2009]
(4) Inventories are updated and obsolete and slow-moving items with net realisable value below cost are identified as at the reporting year-end or up to 2 months before the year-end for dispersion of workload. Inventories are written down to their net realisable value where necessary as a result of notes made in the inventory records. Write-down of inventories is recognised as an expense of the period (account 608020) when the impairment was identified.
(5) The domestic delivery and acceptance of inventories between units of state accounting entities is not accounted for as a sale of inventories but as a transfer.
(6) Defence-related inventories (except for strategic inventories) only used for military purposes are expensed upon purchase as an exception in account group 553 (VAT in account group 6010) with function code 02100, due to their repeated movement out of storage (to exercises and missions) and back to storage. The quantity and location of inventories in storage and in use are accounted for off-balance sheet.
[RTL 2010, 2, 24 - entry into force 11.01.2010]

§ 39.  Investment property

(1) Investment property is accounted for based on the principles of ASBG 6 with consideration of the special requirements provided in this section.
(2) Investment property within the meaning of the general rules is only such land or building or part of a building that is leased to a non-public sector entity to earn rental income or held for capital appreciation and that is not used by any public sector entity in its primary activities. Buildings and rooms used by public sector entities are classified as property, plant and equipment.
(3) Investment property is recorded in account group 154 using the cost method (cost less accumulated depreciation and any accumulated impairment losses). Investment property is revalued on a one-time basis in accordance with principles provided in § 45 of the general rules if its fair value materially differs from its carrying amount for reasons listed in § 45 (1) 1) and 2).
(4) Depreciation charges on investment property are recorded in account 610000. When investment property is sold, the sale price is credited to account 381000, costs to sell are debited to account 381001 and the carrying amount of the investment is debited to account 381010 at the time of sale.

§ 40.  General principles of accounting for property, plant and equipment and intangible assets

(1) The accounting for property, plant and equipment and intangible assets is based on ASBG 5 principles. As a special provision, public sector entities are not permitted to capitalise VAT and other non-refundable taxes and state fees in the cost of property, plant and equipment and intangible assets (except for labour taxes).
[RTL 2006, 11, 198 - entry into force 03.02.2006]
(2) Property, plant and equipment is recorded depending on category in account group 155 and intangible assets are recorded in account group 156. Depreciation and amortisation, impairment (write-downs) and carrying amount of non-current assets upon write-off are recorded in account groups 611 and 613. Gains and losses on disposal of non-current assets are recorded in account groups 3811 and 3813.

§ 41.  Purchase of property, plant and equipment and intangible assets

(1) The capitalisation threshold for property, plant and equipment and intangible assets is 1917 euros (excluding VAT) for assets purchased on or before 31 December 2010 and 2000 euros (excluding VAT) on or after 1 January 2011, except for land, which is capitalised at cost regardless of value.
[RT I 2010, 77, 591 - entry into force 01.01.2011 - applicable for reporting periods starting on or after 1 January 2011]
(2) As an exception, the following may be capitalised regardless of cost:
1) monuments and other items of artistic value, incl. items of artistic, historic and scientific value that do not decrease in value over time;
2) records in public libraries where the retention and lending of records to the public is a core activity.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(3) Non-current assets may be capitalised collectively only if the collection of assets has a uniform useful life and the collective cost is at least the capitalisation threshold for non-current assets (excluding VAT). If components of a single asset have different useful lives, such components are capitalised as separate assets (the aggregate cost of the components is at least the capitalisation threshold for non-current assets excluding VAT).
(4) Expenditures necessary for bringing an asset to its operating condition and location (cost of the asset, transport, installation, dismantling costs that are unavoidable related to the construction or renovation of the asset) are capitalised in the cost of the non-current asset. Training and travel expenses related to beginning operation of an asset are not capitalised in the cost of the asset. Expenses related to the commissioning of assets (organising a tender, owner supervision) are not capitalised if such activities are handled by own employees and their amount cannot be reliably measured or is immaterial. Taxes and state fees related to purchasing assets are also not capitalised.
[RTL 2009, 4, 54 - entry into force 17.01.2009]
(41) Public sector entities whose main purpose is not to provide its owner with a profit do not capitalise borrowing costs in the cost of non-current assets. Instead, such costs are recognised as interest expense when incurred. Public sector entities whose main purpose is to provide its owner with a profit use the same principle if they prepare their financial statements in accordance with the accounting principles generally accepted in Estonia. Subsidiaries that prepare their financial statements in accordance with International Financial Reporting Standards capitalise borrowing costs by recording the capitalised portion in the interest expense account group 650 as an expense and separately in account 650990 as a reduction of expense.
[RTL 2009, 4, 54 - entry into force 17.01.2009]
(5) If property, plant and equipment or intangible assets are produced by own employees and direct costs to produce non-current assets exceed the capitalisation threshold for non-current assets, the following are capitalised based on a relevant document:
1) salary paid to employees involved in asset production and installation for time spent on producing a non-current asset, including taxes thereon;
2) raw materials consumed to produce the assets;
3) cost of raw materials and services directly attributable to the production of assets or transport to location.
(6) Salary costs are capitalised by crediting account group 507. Other cost categories are capitalised directly in non-current assets accounts (accounts 155910, 156910) without going through statement of financial performance accounts.
(7) Each non-current asset is accounted for on non-current asset records where detailed information on the history of non-current assets is retained. Non-current asset records may be electronic or paper-based. Non-current asset records retain the following information on non-current assets:
1) date of initial use;
2) cost;
3) person responsible - person responsible for preservation of the asset and its purposeful and prudent use;
4) unique inventory number;
5) specific register number if available (cadastral register number for land, address for a building, registration number for a vehicle, telephone number for a mobile telephone, etc.);
6) group ID (if parts of an asset have been recognised separately or independent assets are related to the asset where group-based information may be needed);
7) incremental amounts from improvements (renovation) and date recorded;
8) applicable depreciation rate;
9) historical depreciation charges and entries.
(8) The list of non-current assets is classified at least in the classification of accounts in the chart of accounts. If an account contains many assets, it is recommended to divide assets into subcategories.
(9) Each existing and additional non-current asset that later cannot be identified without inventory number is assigned an inventory number that corresponds to the unique inventory number on the non-current asset records.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(91) If assets are purchased collectively and the cost of an individual asset included therein is greater than the capitalisation threshold for non-current assets, each item is marked separately and information on the items is entered in the non-current assets records.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(92) If assets are added to the group and the cost of such assets is lower than the capitalisation threshold for non-current assets, group items may be unmarked or marked based on rules of accounting for low-value assets that are set forth in accounting policies and procedures or other documents of the entity.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(10) Property, plant and equipment funded by grants are analytically accounted for separately in order to ensure the accounting of cost, depreciation and impairment of assets related to grants.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(11) The cost of non-current assets is generally not revalued. Exceptions are provided in § 45 of the general rules.
(12) Expenditures related to research and development are expensed as incurred, except if they involve a separate asset that meets the criteria for capitalisation. Public sector entities that prepare their financial statements in accordance with International Financial Reporting Standards capitalise research and development expenses based on the requirements of such standards.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(13) The purchaser of a connection records the connection fee as part of the cost of a non-current asset connected to the infrastructure if the connection fee exceeds the capitalisation threshold of non-current assets and expenses it if it is lower than the capitalisation threshold of non-current assets.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(14) The vendor of a connection recognises connection fees in excess of the capitalisation threshold of non-current assets as a reduction of the cost of non-current assets constructed for the connection. If connection fees exceed the cost of non-current assets constructed for the connection, the excess is recognised as income. Connection fees may be recorded as non-current assets with a negative value in separate non-current assets records. Connection fees may also be recognised as appropriately grouped groups of non-current assets with a negative value if infrastructure routes are accounted for on a group basis. Connection fees below the capitalisation threshold of non-current assets are recognised as income. If a vendor of a connection applies International Financial Reporting Standards, it may record income from connection fees received on a deferred basis over the useful life of the non-current assets constructed for the connection.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]

§ 42.  Depreciation and amortisation accounting

(1) The cost of property, plant and equipment and intangible assets is generally depreciated or amortised over their estimated useful lives. Land, monuments and other items of cultural value that do not decrease in value over time, string musical instruments and records capitalised as non-current assets by public libraries are not depreciated. Items acquired for decoration and design purposes that have no sustained value, as well as items included in auxiliary collections of museums that need to be replaced after a certain time period, are depreciated over their useful lives.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(2) A specialist with knowledge of the asset proposes its depreciation rate based on the expected useful life of the asset. The following ranges may be used for new assets:

Asset type
Expected useful life in years
Depreciation rate, percent

Buildings
20–50 years
2–5%

Facilities
10–40 years
2.5-10%

Machinery and equipment
5–10 years
10-20%

Fixtures and fittings
2–10 years
10-50%

IT equipment
2–3 years
33-50%

Intangible assets
2–20 years
5-50%

(3) The depreciation rates of more frequently purchased new assets are established in the policies and procedures of state accounting entities (as a precise rate without providing ranges).
(4) Assets are depreciated using the straight-line method, except in cases where another method reflects the consumption of benefits from an asset significantly more objectively. Depreciation starts from the month an asset is taken into use and ends on the month prior to its full depreciation or removal from use. If a fully depreciated asset is still in use, its cost and accumulated depreciation continue to be carried in the balance sheet until the asset has been completely removed from use.
(5) An impairment charge is recognised in case of impairment (partial or full disassembly, dismantlement, destruction, damage, loss). Asset impairment is recognised together with depreciation. Impairment charges are confirmed by the management of a unit of state accounting entity in a non-current asset impairment document.
[RT I 2010, 77, 591 - entry into force 22.10.2010]
(6) If it becomes evident that the actual useful life of an asset differs significantly from the initial estimate, the depreciation period is changed. For that purpose, the remaining useful life of an asset is estimated at least during the annual inventory process. The useful life of existing assets is reviewed when investment (renovation) plans are drafted and improvements (renovation amounts) are added to the cost of the non-current assets. The effect of a change in depreciation period is recorded in the reporting period and in future periods but not retrospectively.
(7) The probable net realisable value of idle assets is reviewed at the end of the financial year and an impairment charge is recognised if it is less than its carrying amount.
(8) Defence-related non-current assets only used for military purposes are only depreciated as an exception from the acquisition month. The off-balance sheet accounting for such assets is started concurrently to monitor its existence and location (together with inventories).
[RTL 2010, 2, 24 - entry into force 11.01.2010]
(9) Public sector entities preparing financial statements in accordance with the accounting principles generally accepted in Estonia do not carry out impairment tests or write down assets to their carrying amount in the case of non-current assets needed to provide public services if the asset value has not been impaired due to damage or other reasons partially or fully due to removal from use.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(10) If low-value assets have been added to a group with uniform estimated useful lives, an estimate is provided upon inventory of non-current assets regarding the group's existence and general condition. If assets from a group were additionally individually recognised as low-value assets, the adjustment to the group is not required on the basis of each low-value asset's individual inventory result.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]

§ 43.  Improvements, repairs and maintenance

(1) Costs related to improvements are added to the cost of property, plant and equipment only if they meet the definition of property, plant and equipment and the criteria for inclusion of assets in the balance sheet and the expenditure is at least the amount specified as the capitalisation threshold of non-current assets (excluding VAT) provided in § 41 (1). Costs related to ongoing maintenance and repairs are charged to period expenses.
[RTL 2006, 11, 198 - entry into force 03.02.2006]
(2) [Repealed - RTL 2009, 4, 54 - entry into force 17.01.2009]
(3) If an improvement results in the replacement of a significant part of an asset, the estimated initial cost of the replaced part and the corresponding accumulated depreciation are derecognised from non-current assets.
(4) If improvements are added to the cost of non-current assets, the potential extension of remaining useful life of the asset is reviewed and in case of a significant change, the depreciation rate is adjusted.
(5) Improvements to roads and routes may be capitalised as annual construction groups if they have a uniform estimated useful life. Such construction groups are written off once their carrying amount reaches zero.
[RT I, 05.01.2011, 5 - entry into force 08.01.2011]
(6) Lessees that have leased assets under operating leases account for expenses incurred for improvement, repair and maintenance on the leased asset not covered in the lease agreement as acquisition of non-current assets if such expenditure meets the definition of property, plant and equipment (and not as deferred rent). If the lessor is not a public sector entity, the lessee depreciates such non-current assets over the shorter of the lease term and the estimated useful life of the asset. If the lessor is a public sector entity, the lessee depreciates such non-current assets over the estimated useful life of the asset. If the lessor is a public sector entity performing such work, it expenses such work that it has performed (without capitalisation) and recognises the consideration received from the lessee as revenue (and not deferred rent income).
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]

§ 44.  Sale of non-current assets

(1) Sale of non-current assets, donation and providing for use free of charge between state accounting entities is accounted for as a transfer whereby the cost and depreciation of the assets are transferred. The recipient records the cost and depreciation of transferred non-current assets.
(2) The gain or loss from sale of non-current assets is recorded in account groups 3810 to 3813 (except in the case specified in subsection 1 of this section).
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(3) A donation of non-current assets is recorded by the donor if the transaction does not constitute acquisition of ownership interest or financial investment, as a non-monetary grant (except for transfers between units of state accounting entities), derecognising the assets from the balance sheet and recording them in the carrying amount account 450200. If the recipient of a non-monetary grant is a public sector entity, it records the non-current assets and non-monetary grant in account 257000 or 350200 at fair value of the non-current assets or, if unknown, at the carrying amount indicated by the granting entity. If the fair value of non-current assets is known, the donor of assets previously revalues the assets to their fair value if required based on § 45 of the general rules.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(4) Non-current assets provided for use free of charge are accounted for as leased assets (ASBG 9). If assets were provided for use free of charge for a period exceeding 75% of the remaining useful life of the asset, the substance of the transaction constitutes finance lease. As no finance lease receivable or liability arises upon free of charge lease of assets, the transaction is accounted for as a non-monetary grant (except for transfers between units of state accounting entities) at the carrying amount of the lessor. The entity providing assets for use free of charge derecognises the assets from the balance sheet and records them in the carrying amount account 450200 and subsequently accounts for the assets off-balance sheet. If the lessee is a public sector entity, it records non-current assets and grants received in account 257000 or 350200 either at fair value of non-current assets or, if unknown, at the carrying amount indicated by the counterparty. If the fair value of non-current assets is known, the donor of assets previously revalues the assets to their fair value if required based on § 45 of the general rules.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(5) Fair value specified in subsections (3) and (4) of this section is determined based on § 18 (41)–(45) of the general rules. The same fair value principles are also applied when the recipient of the assets is a local government entity, other legal entity governed by public law or a unit of state accounting entity in addition to the recipients of assets listed in § 18 (41) 5).
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]

§ 45.  Revaluation of property, plant and equipment

(1) As an exception, the initial cost of an item of property, plant and equipment is replaced with the revalued amount if the fair value of the item differs significantly from its carrying amount due to at least one of the following factors:
1) the non-current asset was purchased in 1995 or earlier;
2) there is no correct information on the actual cost of the non-current asset, including if it has been transferred to a public sector entity during restructuring or absence of the owner and the recipient does not have correct information on its cost or if this is due to a difference in previous accounting principles compared to the accounting principles presented in the general rules.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(2) If a unit of state accounting entity judges that the carrying amount of any of its owned non-current assets differs for aforementioned reasons from its fair value, an appraisal of the asset is conducted by a relevant expert (except for land revaluation). The head of the state accounting entity must approve the appointment of the expert. If there is no reliable information on fair value, the revaluation of non-current assets is not permitted.
(3) Land may be revalued on the basis of the taxable value of land applicable during the revaluation process.
[RT I 2010, 77, 591 - entry into force 22.10.2010]
(4) The revalued amount is deemed the new cost and the former cost and accumulated depreciation are eliminated by using the account group 2904 accounts as corresponding contra accounts. The net revaluation of the state accounting entity is subject to transfer to the balance sheet of the Ministry of Finance at the end of the reporting period, which will also initially record it in account group 2904. At the period end, the Ministry of Finance closes all accounts of the aforementioned account group to the account Accumulated Surplus or Deficit (298000).
(5) It is only permitted to revalue property, plant and equipment once.
(6) It is generally only permitted to revalue non-current assets until 31 December 2005. If it was not completed by that date, it must be done at the first opportunity in future periods.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]
(7) Regardless of the term, assets deemed abandoned and land entered in the land cadastre, never before included in the balance sheet by any public sector entity, are recorded as revaluation of non-current assets.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]

§ 46.  Derecognition of non-current assets

(1) Non-current assets are derecognised (removed from the balance sheet) if the assets no longer exist (are destroyed, lost, etc.) or on the basis of a decision to derecognise assets prior to its decommissioning or destruction. Non-current assets are derecognised pursuant to the State Assets Act.
(2) When assets are derecognised, the carrying amount of non-current assets is expensed (account group 611 or 613).

§ 47.  Accounting for biological assets

(1) Biological assets are accounted for based on ASBG 7 principles.
(2) Biological assets are recorded in the balance sheet account group 157 if their cost is equal to or above the capitalisation threshold of non-current assets provided in § 41 (1) (excluding VAT). Biological assets purchased collectively (with a uniform nature and purpose of use of all collectively purchased assets), they may be recorded on a group basis if the collective value is equal to or above the aforementioned threshold.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(3) Biological assets are revalued to fair value at the annual report date only if fair value can be determined reliably. If fair value cannot be determined because they are not grown for sale, the assets are recorded at cost, less depreciation and impairment charges. Such biological assets are assigned a depreciation rate. If the cost of biological assets is unknown and fair value cannot be reliably determined, the assets are carried at zero.
(4) [Repealed - RT I 2010, 77, 591 - entry into force 22.10.2010]
(5) Gains and losses arising from change in fair value of biological assets, as well as any depreciation and impairment charges, are recorded in account group 614. Gains and losses on sale of biological assets are recorded in account group 3814.
[RT I, 05.01.2011, 5 - entry into force 08.01.2011]
(6) The fair value of natural resources and other undeveloped biological resources cannot be estimated reliably, therefore such assets are accounted for off-balance sheet (account 912000).
(7) The fair value of state forest is determined based on Annex 8 to the general rules.
[RT I, 05.01.2011, 5 - entry into force 08.01.2011]

Chapter 10 LIABILITIES AND NET ASSETS 

§ 48.  Payables and prepayments

(1) Liabilities are accounted for based on principles described in ASBG 3, ASBG 8 and ASBG 9.
(2) The accrual basis of accounting is followed when accounting for liabilities whereby all liabilities arising in the reporting period are included in the balance sheet of the reporting period. If there is no invoice at the date that financial statements are prepared, it is included in accrued expenses group 2032 in the balance sheet.
(3) Deferred income is initially recorded as a liability in account group 2039 and recognised as revenue over the period for which it was earned. As an exception, deferred income below the capitalisation threshold of non-current assets provided in § 41 (1) may be recognised as revenue immediately without distribution over future periods. In case of transactions within the public sector, parties will agree upon an accounting method beforehand.
(4) Borrowings are classified in the balance sheet depending on their remaining term as current and non-current portions in account groups 208 and 258, respectively. All borrowings subject to interest or similar expense arisen as a result of financing activities are included in the balance sheet.
(5) Borrowings are measured using the amortised cost method. If transaction costs are immaterial and the contractual interest rate does not materially differ from the effective interest rate, borrowings may be recorded using the contractual interest rate, expensing the transaction costs as interest expense (account group 650) as incurred.
(6) If a public sector entity is a debtor in a factoring arrangement, resulting in interest payments to the factor (that purchased the receivable), it records the seller of the receivable (factoring client) as trading partner of factoring with recourse and the factor (purchaser of the receivable) as trading partner of factoring without recourse.
(7) Provisions are classified as current and non-current, depending on when they are expected to be settled in account groups 206 and 256. Non-current provisions are discounted at the rate of 4% per annum. Provisions are made and expensed concurrently (reversal of provisions is a reduction of expenses).
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(8) Provisions for pensions are reviewed at the year-end. Increases in pension, occupational pensions and other long-term work-related benefits to current and former civil servants and their family members are included as a provision in the balance sheet of the state accounting entity in which such employees earned their respective benefits. Provisions for pensions are measured using the projected unit credit method under which the future obligations are measured on the basis of the ratable benefit entitlements earned as of the balance sheet date. If such benefits are paid out by another agency (such as the Estonian National Social Insurance Board), it accounts for payouts as transfers to the government agency that has included the relevant provisions in its balance sheet.
[RTL 2009, 4, 54 - entry into force 17.01.2009]
(9) Non-current non-interest-bearing liabilities are measured at present value, discounted at the rate of 4% per annum. In that case, interest expense is recorded in account 650800.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(10) Public sector entities that are not primarily aimed at earning a profit for their owners classify as finance leases situations pursuant to § 15 of IPSAS 13 (Leases) where the leased assets cannot be easily substituted with another asset.
[RTL 2009, 4, 54 - entry into force 17.01.2009]
(11) Public sector entities whose main purpose is not to provide its owner with a profit account for long-term cooperation agreements whereby a for-profit partner provides public services using infrastructure (incl. services related to the operation and maintenance of such infrastructure) and the non-profit public sector entity controls or regulates which public services, to whom and at what price the partner provides and retains control of the infrastructure after agreement expiry through title, right to purchase at a discount or in another manner (hereinafter service concession arrangement) as follows:
1) infrastructure related to a service concession arrangement is recorded as property, plant and equipment at cost, which is the lower of the fair value of construction or renovation work on the infrastructure and the present value of future payments in exchange for such work and it is recorded concurrently as a financial liability in accounts 208600 and 258600;
2) accounting rules applicable to property, plant and equipment are applied to infrastructure assets;
3) payments made to partners in exchange for providing public services are allocated into payment of the financial liability, usage costs of the infrastructure (incl. services related to operation and maintenance) (account category 55), interest expense on financial liabilities (account 650600) and VAT expense (account group 601) or input VAT (account 103701);
4) if the allocation of payments is not disclosed between partners, an allocation of payments analysis is prepared based on the management's judgment as to market conditions related to the cost of construction or renovation work, cost of operation and maintenance services and interest rate.
[RTL 2009, 22, 279 - entry into force 13.03.2009]
(12) If an elected official or senior civil servant is entitled to a one-time benefit upon end of employment, a provision is established using the projected unit credit method from the year that the official was appointed until the first year of the necessary period of service to earn the benefit. If an official continues to hold office for another term, a supplementary discount is applied, recording the expiry of the new term as the date of payout.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]

§ 49.  Net asset reserves

(1) Changes in net asset reserves are accounted for as reclassification from one net asset entry to another (mainly between the reserve and accumulated surplus or deficit). Therefore, transactions resulting in a change in reserves are recorded on a conventional basis during the reporting period, including in income and expense accounts, if the surplus or deficit of the reporting period changed due to the transaction. Calculations are prepared by the end of the reporting period to adjust reserves and accumulated surplus or deficit on the basis of such transactions requiring an increase or decrease of reserves. The allocation of the portion of the current year's surplus or deficit applicable to reserves that is decided on or after the approval of the annual report is recorded in the next financial year.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]
(2) The state's net asset reserves are included in the balance sheet of the Ministry of Finance. Therefore, the Ministry of Finance prepares the data on the formation and use of reserves, also including the revenues paid by other state accounting entities into the treasury subject to allocation to reserves, as well as expenses paid from the treasury charged against reserves, allocating the surplus or deficit of the relevant reporting period in the reserves of the same reporting period.
[RTL 2007, 79, 1368 - entry into force 29.10.2007]

§ 491.  Related party disclosures

(1) Related party disclosures are made in the annual report involving transactions with the following persons (hereinafter related parties) not in compliance with legislation or general requirements of accounting entities' internal documentation or not on market terms:
1) members of the highest governing body and management and their close family members, including spouses or partners and children;
2) foundations, non-profit associations and companies where persons specified in article 1 alone or with family members exercise controlling or significant influence.
(2) Disclosure is provided in the annual report on transactions involving foundations, non-profit associations and companies that are not public sector entities where the reporting entity exercises significant influence.
(3) The balances of transactions subject to disclosure in the annual report are presented in trial balances:
1) under trading partner code 800601 for persons listed in subsection (1) 1) of this section;
2) under trading partner code 800301 or 800501 for persons listed in subsection (1) 2) of this section;
3) under trading partner code beginning with 0 to 6 and where the fourth number is 6 or 7 for persons listed in subsection (2) of this section;
(4) Persons preparing, approving and authorising accounting source documents related to transactions subject to disclosure pursuant to subsection (1) of this section add a corresponding comment to the documents according to information available to them. The commented document is submitted to the accounting entity that will use it to record the transaction under a related party trading partner code provided in subsection (3) 1) or 2).
(5) Related party disclosures are provided in the annual report for each of the groups specified in subsections (1) and (2) of this section, classified by transaction type as follows:
1) labour cost, incl. fringe benefits and taxes;
2) award and receipt of grants;
3) purchase and sale of goods and services;
4) lending and borrowing;
5) providing and receiving guarantees and deposits;
6) other transactions.
(6) Balances of assets and liabilities and income and expenses related to transactions with groups of related parties are separately disclosed in the annual report. Such information must match the balances under related party trading partner codes shown in trial balances.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]

Chapter 11 PROCEDURE FOR INVENTORY AND VALUATION OF ASSETS AND LIABILITIES 

§ 50.  Operations and documentation

(1) The actual cash balance is compared to the one reported in the balance sheet on a daily basis. The balances of analytical sub-ledgers is verified at each month-end and reconciled with the balance sheet. Reconciliations performed are documented in writing (a notation is added by the reconciler to document the reconciliation, indicating any differences and confirming the reconciliation by signature). In case of differences, adjusting entries are made or else a direct supervisor is immediately notified. Adjusting entries are documented. The reconciliation intervals and responsible persons are defined in the job descriptions of accounting entities' employees.
(2) A complete inventory (annual inventory) of all significant assets and liabilities of units of state accounting entities is carried out at least annually. Annual inventories are organised either as at the financial year-end date or up to two months before the financial year-end by groups of assets and liabilities in order to disperse the inventories, for instance:
1) inventory of inventories;
2) inventory of property, plant and equipment and investment property;
3) inventory of the analytical lists of receivables and sending out confirmation letters concerning material receivables;
4) inventory of the analytical lists of liabilities and sending out confirmation letters concerning material liabilities;
5) inventory of cash registers;
6) sending out confirmation letters to banks to confirm bank account balances and transactions involving banks;
7) inventory of financial investments and sending out confirmation letters to significant trading partners;
8) reconciliation of balances of public sector entities submitting trial balances;
9) inventory of other assets.
(3) Inventories are concluded on dates enabling the on-time preparation of financial statements. The management of units of state accounting entities assigns the persons to conduct annual inventory of inventories, property, plant and equipment and investment property, incl. person(s) responsible for the inventory. Inventory committees related to inventories and property, plant and equipment are comprised of at least 2 members, neither of whom is the person responsible for the assets subject to inventory. The person responsible participates in the work of the inventory committee in an explanatory capacity. The documentation to certify the completion of annual inventory is signed by committee members and the person responsible for assets.
(4) The accounting officer of the state accounting entity decides on which of receivables and liabilities are subject to confirmation letters being sent out to trading partners.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
(5) No written confirmation letters are sent between public sector entities that submit trial balances (see § 7 (3) of the general rules), information on balances and revenue is exchanged via email instead. If there are any unrealised gains or losses determined through reconciliation with entities under controlling influence, such gains and losses are accounted for using the equity method. State accounting entities and local government entities establish internal accounting principles in their policies and procedures, preventing unrealised gains or losses from occurring from internal transactions between state accounting entities and local government entities.
(6) Documentation to certify the completion of annual inventory is balance confirmation letters, bank account statements, inventory sheets or other documents confirming that assets and liabilities have been recorded correctly. Such documentation is retained as source documentation for business transactions according to the procedure set out in the Accounting Act.
[RTL 2005, 26, 366 - entry into force 11.03.2005]
(7) Records and items of cultural value recorded by museums, as well as items included in auxiliary collections of museums may be subject to inventory once every five years. The exceptional intervals for such inventories are set forth in the accounting policies and procedures of state accounting entities, including justification.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(8) In the Defence Forces of Estonia, the annual inventory performed on storage inventories and property, plant and equipment are distributed throughout the year on the basis of a pre-approved schedule. A separate procedure is enacted for performing inventories in which the operational procedures, valuation methods for inventories and assets and documents to be drafted are established. Such procedure is subject to approval by the management of the state accounting entity.
[RTL 2010, 2, 24 - entry into force 11.01.2010]
(9) Inventory is performed on forest managed by the State Forest Management Centre based on relevant procedure on a year-round basis and ensuring that inventory data on the volume and condition of trees are not older than ten years.
[RT I 2010, 77, 591 - entry into force 22.10.2010]

§ 51.  Inventory intervals

(1) The following are the requirements as to intervals of performing inventory of assets and liabilities:

Asset / liability subject to inventory
Inventory frequency and scope

Cash and bank accounts
Daily reconciliation of balances, confirmation letters from banks at the year-end;Unannounced verification of the cash register at least twice annually and inventory at the year-end

Taxes receivable and payable
Reconciliation of balance sheet balances with Estonian Tax and Customs Board's account records in the e-Tax Board information system at least at each quarter end, clarification and elimination of differences

Other receivables and prepayments
Monthly reconciliation of sub-ledgers with balance sheet balances and write-downs of time-barred receivables at least at each quarter-end, balance confirmation letters from all significant debtors as at the year-end or two months before the financial year-end

Financial investments
Monthly reconciliation of sub-ledgers with balance sheet balances, revaluation to fair value, accrued interest calculation, balance confirmation letters as at the year-end or balance reconciliations concerning all significant investments

Inventories
Physical inventory count at least annually at the year-end date or up to two months before the financial year-end and an estimate as to any impairment of slow-moving inventories

Property, plant and equipment and investment property
Physical inventory count at least annually at the year-end date or up to two months before the financial year-end and an estimate as to the correctness of the remaining useful life and any impairment of the assets

Other assets
Inventory at least annually at the year-end date or up to two months before the financial year-end, employing appropriate methods to confirm the existence of assets and the correctness of carrying amounts

Payables and prepayments
Monthly reconciliation of sub-ledgers with balance sheet balances, balance confirmation letters from all significant creditors as at the year-end or two months before the financial year-end

Inter-entity balances between public sector entities submitting trial balances
Quarterly based on trial balance information system requests, if necessary, additionally via email based on correspondence

[RT I, 10.12.2013, 1 - entry into force 13.12.2013] (2) Estonian Tax and Customs Board may send balance confirmation letters concerning receivables and payables related to taxes, state fees and fines (account groups 102, 152, 200, 253, account groups 1037, 2030, except for balances with public sector entities) as at up to one month before the financial year-end.
[RTL 2006, 85, 1547 - entry into force 08.12.2006]

§ 52.  Inventory and valuation procedures

(1) During inventory of cash:
1) the cash on hand is counted and results are documented in a cash inventory form signed by participants of the inventory and sent to the accounting unit;
2) the accounting unit reconciles the cash inventory form with the cash balance on the books, the inventory form is confirmed with the signature and reconciliation date of the accounting representative; any shortages are recorded in account 103690 until they are reimbursed; overages are recorded as income (388890).
(2) During reconciliation of bank accounts:
1) daily the bank account statements are reconciled with bank account balances; the reconciliation is recorded with a relevant notation on the bank account statement and a date and signature are added;
2) annually all financial institutions are sent letters to confirm balances that the unit of state accounting entity has had financial dealings with during the financial year.
(3) The following is carried out to value and inventory financial investments:
1) measurement of fair value or calculation of interest depending on the type of investment;
2) correct classification of short-term and long-term financial investments at the financial year-end;
3) investments denominated in foreign currency are translated at balance sheet date based on the reference rates of the European Central Bank;
[RT I 2010, 77, 591 - entry into force 01.01.2011 - applicable for reporting periods starting on or after 1 January 2011]
4) sending out confirmation letters as at the year-end to significant trading partners.
(4) The following is carried out to inventory receivables and prepayments:
1) allocation of receivables on the accrual basis;
2) assessment of the collectibility of receivables and recognition of write-downs if necessary,
3) receivables (excluding prepayments) denominated in foreign currency are translated at balance sheet date based on the reference rates of the European Central Bank;
[RT I 2010, 77, 591 - entry into force 01.01.2011 - applicable for reporting periods starting on or after 1 January 2011]
4) classification of receivables as short-term and long-term;
5) calculation of accrued interest on interest-bearing receivables;
6) sending out balance confirmations and reconciliation of received responses with accounting data; the nominal amounts of receivables are indicated in balance confirmations when they are sent out without deducting doubtful debt or discounted interest, also indicating any off-balance sheet claims for fines and late payment interest.
(5) The following requirements apply to inventory counts of inventories:
1) inventories are placed in a manner enabling them to be counted;
2) inventories are moved in the presence of the inventory committee and corresponding documentation is kept separately during the inventory;
3) if count sheets are paper-based, pre-filled count sheets do not contain quantities or amounts but are instead entered by the committee on the count sheets in the course of the inventory count;
4) counted units or product groups are labelled to avoid double-counting;
5) in case of discrepancies and indication of impairment, reports are prepared to document the shortages, overages and impairments;
6) a letter of explanation on any overages and shortages is enclosed to the final report and shortage is recovered from those responsible, if any;
7) documents are dated and signed by counters and the person bearing material liability;
8) adjustments are made to the accounting data in the accounting unit where necessary based on signed reports; discovered shortages are expensed or recorded until payment (account 103690); overages are recorded (at zero value if no fairer estimate exists).
(6) The physical inventory count of property, plant and equipment and investment property is similar to that of inventories but pre-filled count sheets indicate the quantities and amounts and information on the remaining depreciation period of the assets. In addition, the following operations and completed as part of the inventory count:
1) the need for revaluation of assets is assessed (see § 39, 45 of the general rules);
2) obsolete (physically or functionally obsolete) and idle assets are separately indicated in the final inventory report and their potential net realisable value is estimated;
3) the depreciation rates of assets are reviewed;
4) reports for the derecognition, impairment and revaluation of assets are prepared based on the remarks provided in the count sheets. The accounting unit records the adjustment entries for investment property and property, plant and equipment based on such reports.
(7) The following operations are completed to perform an inventory count on payables and prepayments:
1) allocation of payables on the accrual basis;
2) payables (excl. prepayments) denominated in foreign currency are translated at balance sheet date based on the reference rates of the European Central Bank;
[RT I 2010, 77, 591 - entry into force 01.01.2011 - applicable for reporting periods starting on or after 1 January 2011]
3) classification of payables as current and non-current;
4) calculation of accrued interest on interest-bearing liabilities;
5) reconciliation of tax liabilities with statements from the Estonian Tax and Customs Board;
6) sending out balance confirmations and reconciliation of received responses with accounting data;
7) valuation and recording of provisions and contingent liabilities.
(8) Public sector entities that submit trial balances reconcile inter-entity balances as at each quarter-end. This is accomplished through reconciliation requests of trial balance information system balances and line items after the submission of trial balances. If an entity submitting trial balances expects that a trial balance may contain discrepancies with other entities, this is anticipated by submission of balance reconciliation requests to other entities submitting trial balances before the trial balances are due. In such cases, the entity wishing to pre-reconcile balances sends its balances via email to the other party and waits for the other party's response. The other party must respond to the inquiry via email and submit its balances. In case of discrepancies, email correspondence will continue until discrepancies are eliminated. In case of a dispute regarding inter-entity balances, the State Shared Service Centre is notified. The discrepancies are corrected based on a solution proposed by the State Shared Service Centre. It is not required to correct discrepancies of 100 euros or less, except in case of internal discrepancies within a group where the first four trading partner code digits of the entities submitting trial balances are the same for groups of state accounting entities or the first three digits are the same for other groups. In such groups, the parent entity may establish a permitted threshold for discrepancies, which must not be greater than 100 euros.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(9) Defence-related non-current assets only used for military purposes are counted together with defence-related inventories on the basis of principles provided in subsection (5) of this section and § 50 (8). At the year-end it is verified if the assets in the list of defence-related non-current assets are also recorded off-balance sheet together with inventories. If assets recorded off-balance sheet are deemed obsolete or no longer exist, such non-current assets are derecognised from the balance sheet.
[RTL 2010, 2, 24 - entry into force 11.01.2010]

§ 53.  Consolidation procedures

(1) Entities entering trial balances reconcile their balances with those of other public sector entities. Reconciliation is performed with a relevant request in the trial balance information system of the Ministry of Finance. In case of discrepancies, the entity entering trial balances must contact the relevant entities to clarify the reasons for discrepancies and agree upon adjustments to be made.
(2) If there are any such balances between the entities consolidated by a parent entity where certain additional entries are needed for elimination or fair inclusion in the consolidated financial statements, it is possible to enter them as an additional group trial balance.
(3) After the data of all group entities have been entered, the parent once again reconciles all balances within its governing area with balances of other public sector entities. Reconciliation is performed with a relevant request in the trial balance information system of the Ministry of Finance. In case of discrepancies, the parent must contact the relevant entities to clarify the reasons for discrepancies and agree upon adjustments to be made.
(4) If all discrepancies are resolved, the parent entity obtains its own group entities' data from the trial balance information system to adjust ownership interest and records the corresponding entries in the parent entity's trial balance or in the supplementary group trial balance. The parent entity may thereafter change the status of the trial balances within its governing area to "OK" to lock them.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(5) Units of state accounting entities record the transfer of the year-end surplus or deficit to the Ministry of Finance by 31 March pursuant to § 17 (7) of the general rules. It may be done at a later date upon agreement with the State Shared Service Centre. The State Shared Service Centre thereafter makes the corresponding entries in the trial balance of the Ministry of Finance.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(6) The State Shared Service Centre locks the trial balances on the 8th working day after trial balances were due or on 1 April for annual trial balances from being modified by users by changing their status to "Final". Thereafter, the State Shared Service Centre modifies trial balances in coordination with submitting entities and records supplementary consolidation entries. Trial balances can no longer be modified after the audit of the consolidated financial statements of the state is concluded.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]

Chapter 12 IMPLEMENTATION 

§ 54.  Preparation of the final balance sheet for 2003

[Repealed - RT I, 15.12.2011, 1 - entry into force 18.12.2011]

§ 55.  Permitted differences in 2003 and 2004 annual reports

[Repealed - RT I, 15.12.2011, 1 - entry into force 18.12.2011]

§ 56.  Disclosures

(1) The State Shared Service Centre presents on its website current information on amendments to the general rules or annexes thereto.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]
(2) The State Shared Service Centre publishes on its website instructions on using the chart of accounts, sample accounting entries and other documents, data and notices related to the implementation of the general rules.
[RT I, 10.12.2013, 1 - entry into force 13.12.2013]

§ 57.  Repeal of earlier act

[Omitted.]

§ 58.  Implementation of the Regulation
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]

(1) This Regulation will become binding on state accounting entities, local government entities, other public legal persons (except for Eesti Pank, Guarantee Fund, Estonian Traffic Insurance Fund and public trade federations), foundations and non-profit associations under the state's controlling influence and the State Forest Management Centre in respect of the balances of balance sheet accounts from 31 December 2003 and in other respects from 1 January 2004.
(2) This Regulation will become binding on public sector entities not listed in subsection 1 in respect of the balances of balance sheet accounts from 31 December 2004 and in other respects from 1 January 2005.
[RTL 2004, 104, 1685 - entry into force 06.08.2004]
(3) § 48 (8) of this Regulation will be implemented from 31 December 2008, except in respect of accounting for provisions for pensions under § 57 of the Civil Service Act, in which respect § 48 (8) of this legislation will apply from 31 December 2009. The following will also apply to provisions for pensions:
1) provisions for pensions to pensioners receiving increased pensions pursuant to the Civil Service Act are accrued in the balance sheet of the state accounting entity that pays out such pensions; and
2) provisions for pensions earned on initiation and termination of employment of employees will be passed on as transfers after 31 December 2009 and provisions for pensions to those not employed by any government agency and not yet retired are accrued in the balance sheet of the Ministry of Finance.
[RTL 2009, 4, 54 - entry into force 17.01.2009]
(4) The accounting principles set forth in § 48 (11) of this Regulation apply to reporting periods starting on or after 1 January 2009.
[RTL 2009, 22, 279 - entry into force 13.03.2009]
(5) The accounting principles set forth in § 22 (2), § 38 (6), § 42 (1) and § 42 (8) and the control procedure set forth in § 52 (9) of this Regulation apply to reporting periods starting on or after 1 January 2010.
[RTL 2010, 2, 24 - entry into force 11.01.2010]
(6) Property, plant and equipment and intangible assets with cost of less than 30,000 Estonian kroons will be derecognised during the year 2010 using the cash flow code 12 and by recording the carrying amount as depreciation or amortisation charges.
[RTL 2010, 2, 24 - entry into force 11.01.2010]
(7) Defence-related non-current asset records are not required to include information specified in § 41 (7) 3) if such information has been recorded off-balance sheet in a ledger kept with inventories.
[RTL 2010, 2, 24 - entry into force 11.01.2010]
(8) VAT expense arising on acquisition of non-current assets may be recorded in account 601000 until 31 December 2011.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(9) For-profit public sector entities preparing financial statements in accordance with the accounting principles generally accepted in Estonia will derecognise grant liabilities recorded in account category 257 as at 1 January 2012, recording them in accumulated surplus (deficit) without the restatement of financial statements prepared for prior reporting periods.
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
(10) Public sector entities amending their accounting policies for connection fees received pursuant to § 41 (13) of this Regulation will reduce their connection fees balance recorded in account 253800 to zero during the year 2012 by recording connection fees with a carrying amount below the non-current assets acquisition threshold in accumulated surplus or deficit and connection fees with carrying amount equal to and above the non-current assets acquisition threshold will be recorded as a reduction of the cost of non-current assets without the restatement of financial statements prepared for prior reporting periods.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(11) § 48 (12) of this Regulation will be applied for the first time as at 31 December 2012 by calculating benefits with regard to the ongoing term of office at that date without the restatement of financial statements prepared for prior reporting periods.
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
(12) § 491 of this Regulation is applicable to annual reports prepared for reporting periods starting on or after 1 January 2015.
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
Annex 1 Account codes
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
Annex 2 Trading partner codes
[RT I, 21.11.2014, 7 - entry into force 24.11.2014]
Annex 3 Function codes
[RT I, 10.12.2013, 1 - entry into force 01.01.2014]
Annex 4 Source codes
[RT I, 15.12.2011, 1 - entry into force 18.12.2011]
Annex 5 Cash flow codes
Annex 6 Trial balance form and explanations for completion
Annex 7 Annual report form
[RT I, 13.11.2012, 7 - entry into force 16.11.2012]
Annex 8 State forest value
Read Entire Law on www.riigiteataja.ee