THE LAW OF AZERBAIJAN REPUBLIC

ON ACCOUNTING

CHAPTER I
GENERAL PROVISIONS

Article 1. The Law Purpose
The present Law determines the order of the state regulation
of accounting in the Azerbaijan Republic, including general
principles of organization and keeping of accounting, rights,
obligations and responsibilities of enterprises, institutions and
organizations and other managing subjects, the order of
accounting(financial) returns' publication, measures ensuring the
authentity of accounting information.

Article 2. Legislation on accounting and returns
Relations connected with accounting and returns are regulated
by the present Law and other legislative statements of the
Azerbaijan Republic.
If international treties of the Azerbaijan Republic determine
rules differing from the rules of the Azerbaijan Republic
legislation on accounting, the rules of the Azerbaijan Republic's
international treaties are applied.

Article 3.Principal concepts of accounting
Accounting is a streamlined and regulated system of
collection, by means of double record, registration and summation
of information on property, liabilities, capital, current assets
and finacial results of enterprise's, institution's,
organization's and other managing subject's activity on the base
of natural indices in terms of money, by a way of unbroken,
continuous, documentary and interconnected recognition, and
streamlining of economic operations.
In the present Law the following concepts are used:
economic operations - the facts which can individually show
property, capital, liabilities of enterprise, institution,
organization and other managing objects, their movements, finacial
results and financial-economic activity on the whole;
initial documents - writting certificates affirming economic
operations and leader's (owner's) instruction on their
realization;
accounting registers - systemizing economic operations on the
basis of initial accounting documents;
inventory - control, evaluation and official registration of
actual state of enterprise, institution, organization and other
managing subjects' property, liabilities, settlements, material
and other valuebles and other valuables;
book-keeping account - the main unit of grouping and keeping
of economic operations' datas and other accounting information.
Synthetic book-keeping accounts group by definite indications and
serve for the summation of information on definite types of
property, capital, financial results, etc. Analytical accounts
group in more detailed aspect in enterprise accounts, material and
other accounts within the united synthetic account. Sub-account
showing the grouped datas of analytical accounting, is a component
of synthetic account.
book-keeping accounts' plan - a totality of synthetic accounts
and book-keeping sub-accounts determined by definite indications;
accounting standards - a normative document determining the
obligatory rules or prescriptions on accounting, as developing the
present Law's provisions;
ordinary (normal) operational cycle - period from purchasing
of raw materals, materials, goods, etc.,investing of finance
(capital), to their reimbursement in a result of a sale of
finished product, works, services;
current capital (assets) - financial resources and other
assets are expected to be involved in production, circulation and
consumption spheres for one year or ordinary (normal) operational
cycle (but not more than one year). Money resources in cash and
bank, easy realized securities, debts receivable, stock of goods,
raw materials, materials, fixed assets under production, finished
product, current part of future expences - are classified as a
current capital (assets);
noncurrent (permanent) assets - assets which useful properties
are expected to use for several years. Under this category fall
the following: capital assets, investments or other finance
investments, intangible assets;
intangible assets: a type of noncurrent assets which do not
have a physical basis but have a value, being based on rights or
privileges of their owners;
entity's property: a totality of current and noncurrent assets
of entity;
current liabilities - received loans, securities, notes
payable and other liabilities are to be paid for one year or for
ordinary (normal) operational cycle (but not more than one year);
noncurrent liabilities - liabilities are to be paid for the
term more than one year;
finance investments - a type of enterprise's, institution's,
organization's or other managing subject's investments, related to
acquisition of stocks, bonds and securities, investment in
statutory funds of other entities as well as providing loans,etc.;
original cost- actual expenditures for acquisition of
property, object, including expenses for purchasing, installation
and other analogous expenses;
restoration cost - evaluation of noncurrent assets in possible
costs, which are necessary at the present moment;
financial (accounting) returns - a totality of final actual
and authentic accounting indices. Is presented for their users
(shareholders, creditors, owners, state bodies) in the determined
forms showing a property and financial condition of enterprise,
institution, organization and other managing subjects, results of
their economic activity;
accounting balance - a form of financial returns, reflecting a
property and financial condition of enterprise, institution,
organization and other managing subject by the end of the last day
of the accounting period.

Article 4. Compulsatority of Accounting
In accordance with the present Law all the managing subjects
at the territory of the Azerbaijan Republic being engaged in
business or other activity with or without the aim to gain a
profit, being or not being juridical persons
(enterprises,institutions, organizations, etc., in the present Law
further called as "entity") regardless of their subordination and
form of ownership, are obliged to keep accounting.

Article 5. Objects of Accounting
1.Objects of Accounting are the following:
money, property, used and unused in natural indicators
(including rented, granted, handed over for free use and other
valuables);
production resources and expenditures, finished product;
intangible assets;
money resources, securities, settlements with juridical and
physical persons, investments;
revenu and expenses, profit and losses by types and periods,
profit's utilisation (distribution, accumulation),damages;
depreciation (amortization) of current assets, objects of
little value, intangible assets;
liabilities on credits and other debts, financial assignations
and their utilisation;
formation and utilisation of entities' reserve and other
funds, including their statutory funds, other objects in
accordance with book-keeping accounts' plan.
2.In accordance with book-keeping accounts' plan, objects of
accounting, provided in paragraph 1 of the the present Article
without fail must be shown in synthetic, analytical and sub-
accounts, accounting registers in the interconnection and by means
of double record. The order of accounting (including an accounting
on entity's account, materia and other analogous accounts) is
established depending on needs of operation and control.

Article 6. Main principles of Accounting
Main Principles of Accounting are the following:
continuity of accounting - continuos fulfillment of an
accounting from the moment of an entity establishment to its
liquidation, application of specific rules of accounting in the
liquidation period;
use of book-keeping accounts - an authentic registration in
book-keeping accounts by means of double record, without any
exemptions, all economic opertions, reflecting movements of
property, entity's liabilities, revenue and expenses, profit and
losses and other analogous indices at the moment of their rise;
ensuring of prevailling significance of a economic operation's
economic matter over its all rest indications - ensuring of
prevailling significance of a economic operation's economic matter
over its all rest indications when the operation is shown in
accounting and returns; keeping it as a commercial secret in
accounting policy. The operation's matter is registered in primary
accounting documents of the entity;
ensuring of the prudence in economic activity - carrying out a
large-scale preparatory work with a prudence to show in accounting
and returns potential losses or liabilities with their maximal
transformation in profit or statements when forming the entity's
financial results are formed;
ensuring of evaluation - evaluation of all current and
noncurrent assets, liabilities and other indices of the entity by
their original and restoration costs with bringing it into line
with market prices.

CHAPTER II
ORGANIZATION OF ACCOUNTING

Article 7. Enterprise obligations on organization
of accounting
1. An enterprise keeps accounting of its property, liabilities
and all economic operations in their interconnection and by means
of double record in book-keeping accounts in accordance with
standards, book-keeping accounts' plans and other normative
documents elaborated on the basis of the present Law.
2. When keeping accounting the following are to be ensured:
an authentic recognition of economic operations, carried out
for the accounting period, observance of accounting policy
requirements adopted depending on management conditions, and
accounting standards, other normative documents elaborated on the
basis of the present Law, explanation of changes in the accounting
policy in comparison with the last period;
completeness and authencity of recognition of property's,
liabilities', capital's, settlements's and other valuables'
inventory results for the accounting period (month, quarter,
year), ensuring of correct, chronologically consecutive
registration of all economic operations;
correctness of classisifying revenue and expenses to the
periods under review;
observance of the adopted accounting policy for the accounting
period;
There would be properly determined a classification of current
expenses as production (circulation) costs and investments in
accounting. To the first day of each month the analytical
accounting datas are to be checked with datas of synthetic
accounting on turnovers and balances with the determination of
their identity and authenticity.

Article 8. Objectives of Accounting
Main objectives(goals)of accounting are:
formation of complete and authentic information for the prompt
leadership and management carried out by financial, tax bodies,
bank institutions, investors, goods sellers and buyers, creditors,
State bodies, other concerning organizations and persons; for
preparation and presentation of financial (accounting) returns and
also necessary information on economic processes and financial-
economic activity of the entity;
ensuring of the control for employment of labour, material and
financial resources according to the approved standards,
normatives and estimates; for property's availability and
movements; for property rights and liabilities;
timely prevention of negative occurrences in the financial-
economic activity, discovery and mobilization of internal economic
resources.

Article 9. Organization of Accounting
1. Responsibility for organization of accounting at the entity
falls on its its head.
2. The entity's head creates necessary condiitons for proper
accounting, ensures the observance of requirements for timely and
proper preparation and presentation of accounting documents and
datas to workers of all units, services, concerning to accounting,
and observes requirements of normative documents for accounting.
3. The entity's head works out internal orders, resolutions,
rules and other documents on organization, keeping of accounting,
formation of accounting policy, on the order of presentation of
internal accounting returns, inventory, means of property
evaluation, liabilities, etc.
At the same time he determines an organizational form of
accounting, rules of document's circulation and technology of
accounting information processing, works out internal accounting
system, determines the order of economic operations' control, the
order of authorization to sign documents and the others, what are
necessary for solution of accounting's objectives.

Article 10. Accounting Service
1. The entity's accounting service is carried out by
accounting department being a stuctural unit (department,
division) of the entity and by centralized accounting department
being directly subordinate to the head of the enterprise, by
independent accountants and accountants attracted on the contract
basis.
2. Supervision on accounting matters is carried out by a head
of the indicated unit (department, division) or by a chief
accountant. At the entity, having not an independent structural
unit on accounting service, this work could be executed by a
specialized organization or expert on the contract basis.
3. A chief accountant position can occupy everyone having a
higher specialized education on accounting or having a status of
an independent accountant. If necessary, duties of a chief
accountant could be placed on persons without a higher specialized
education on accounting, but having not less than five years
service in the field of accounting.
4. A chief accountant or a head of accounting service, being
guided by the present Law and all the accounting standards worked
out in accordance with the present Law, checks an observance of
general principles of accounting.
5. To reflect authentically all economic operations carried
out by the entity on the accounts (and also in accounting
registers), to check it, to present operations datas, to prepare
and present accounting (financial) returns in established terms,
to find out and mobilize internal resources together with other
units and services, a chief accountant or head of accounting
service ensures an economic analysis of financial-economic
activity.
6. Chief accountant or head of accounting service together
with a head of the entity, signs documents being a basis for
acceptance and issue of goods, materials and other valuables,
financial resources, and also payment, credit and financial
liability. If the mentioned documents are not signed by a chief
accountant they are considered invalid ones and are not accept for
execution.
7. A head of the entity concludes a written contract with
workers attaining the age of 18 years, directly dealing with
(accordingly to their positions) storage, processing and sale
(issue), transportation or with use of issued valuables in the
production process, or executing works of such kind, on their full
material responsibility. A list of those positions and works and
also a standard contract is approved by the cabinet of Ministers
of the Azebaijan Republic.
8. At the small entity where is not a cashier position, his
duties can perform other member of the staff.
9. When a chief accountant is discharged, after a commission,
established by the entity head, has audited the accounting
conditions and authencity of account datas and after official
registration of the statement, his duties are turned over to a
newly appointed chief accountant ( and when he is absent - to the
member of the staff who is charged with duties of a chief
accountant). The statement is drawn up in triplicate, is approved
by the entity head, its first copy is keeped in the accounting
department.

Article 11. Independent Accountant
1. An independent accountant is a physical person being
entitled by Licence of the Azerbaijan Republic Acconting Chamber
to carry out operations on accounting at the territory of the
Azerbaijan Republic.
2. Status, rights and obligations of an independent
accountatnt are determined by the Law of the Azerbaijan Republic.

CHAPTER III
ACCOUNTING DOCUMENTATION AND REGISTERS

Article 12. Initial accounting documents
1. Initial accounting documents reflecting a fact of economic
operations' fulfilment, serves as a basis for records in
accounting registers.
Initial documents (including paper and machine bearers of
information) must have the following requisites:
title, number, code, location and date of the document(form)
preparation, title of the entity on behalf of which the document
is drawn up, a subject and quantitative measurement of economic
operations (in natural indicators and in terms of money),
posirions, surnames, names, patronymics, personal signatures and
other attributes of persons being responsible for fulfilment,
completion and corectness of economic operations' official
registration.
Depending on the operations character and accounting datas
processing technology there could be included additional
requisites in initial documents.
Initial documents would be drawn up at the moment of
operations fulfilment, and in case if the latter is impossible,
immediately at the moment of operations' completion.
Persons who drawned up and signed initial documents, are
responsibile for a proper preparation of initial documents, their
passing in established terms for their recognition in accounting,
as well as for authencity of information which they contain.
To check and regulate datas processing on the basis of initial
documents, the consolidated accounting documents would be drawn
up. These documents could be prepared on paper and machine bearers
of information.
Money and payment documents, financial and credit liabilities
could be visaed by not less than two persons being entitled to
sign them accordingly to the list approved by the entity's head:
the first signature - is of a person representing a function of a
general leaders, the second one - of a person representing a
function of leaders of accounting department at the entity.
2. When operations related to acceptance and issue of money
resources, material valuables and other properties are carried out
on the basis of initial documents,, documentations' copies are
given to a juridical person's representatives or to physical
persons taking part in the operations. The duty to provide
partcipants with the copies is placed on the person who officially
registrates the operation at the entity.
3. Documents, accepted for accounting, contain the information
required for recognition in book-keeping accounts. The information
is accumulated and systemized in the accounting registers,
recommended by the Ministry of Finance of the Azerbaijan Republic
or drawn up by ministries and government departments with
adherence to general principles.
Information on economic operations, fulfilled by entity for
certain period, is transfered from accounting registers to
accounting accounts in a grouped form.
4. It is not permissible to make non-confirmed corrections in
initial documents. Corrections must be confirmed by signatures of
persons witnessing the document, with indication of correction
date. There would not be any corrections in cash and bank
documents.
5. Initial documents, accounting registers, accounting returns
would be kept in strict accordance with the established order and
terms.
Responsibility for ensuring of documents' preservation and for
their timely delivery in archive in the period of work with
documents falls on a chief accountant.
6. Control of initial accounting documents is carried out by
the Ministry of Finance of the Azerbaijan Republic.

Article 13. Accounting Registers
1. To reflect in accounting the information being in the
documents accepted for accounting, it is necessary to accumulate
and systemized the information in accounting registers.
The registers are prepaired by means of unbroken, continuous,
chronologic, system and other types of registration in specially
ruled books (journals), on individual sheets and cards, in a form
of machine sheets, obtained when computing machinery is use, on
discettes, magnetic tapes and machine bearers of information. The
order of registers formation is regulated by accounting standards.
To use properly machine bearers of information, the entity
which fulfil accounting registers by this means, is obliged to
provide an accounting department with modern accounting machinery
and technical means.
2. All managing subjects at the territory of the Azerbaijan
Republic are obliged to keep accounting registers in Azerbaijanian
language.
Foreign accounting registers regulated by foreign accounting
standards when they are delivered in Azerbaijan, must be
translated into Azerbaijanian language. Accounting registers in
Azerbaijanian language also could be translated into other
languages for research and for other purposes.
3. A chief (independent) accountant or a person specially
appointed by entity head for this purpose is responsibile for
correctness of preparation of the main book, turnover list on
synthetic accounts and also for preservation of accounting
registers and protection of the datas registered their

Article 14. Inventory of property and liabilities
1. To confirm a correctness and authencity of accounting and
returns, entity would periodically fulfil an inventory of its
property, liabilities, payments, capital and other material
resources, all the assets and liabilities of the balance on the
whole.
2. The entity determines the number of inventories to be
carried out in the accounting year, their dates, list of property
and liabilities to be subject to check in course of each
inventory, except of cases when an inventory is compulsory.
3. An inventory is compulsory when the following cases take
place:
entity leases, ransoms, sales the property, as well as when it
is reorganized into public or municipal enterprise, join-stock
company or another entity;
an inventory is carried out aimed to check a state of property
and liabilities before preparation of annual accounting returns
not earlier than October 1;
before preparation of liquidation balance when entity is
liquidated, and other cases provided by legislation of the
Azerbaijan Republic;
financially responsible persons are on leave (go for holiday)
or they are replaced;
the facts of missappropriation and abuse have been revealed;
fires or natural disasters;
revaluation of values;
if there is the court's or preliminary investigator's
appropriate verdict or written order of public prosecutor's
office;
When privatization is carried out, the owner's or juridical
persons's status changes, an inventory is fulfilled by the parties
consent or by demand of state property management bodies.
4. Capital stock could be subject to inventory in each three
years, and library stock - in each five years.
5. The entity ensures a control on movements of material
valuables, created in the period from the start to completion of
entity inventory.
6. When an inventory and other inspections are carried out,
the property value which is not shown in accounting datas, is
regulated in the following order:
capital stock surpluses', material valuables', money
resources' and other property's value, with establishing their
causes and guilty persons, are credited (at the places of their
exploitation) on accounts of financially responsible persons and
are correspondingly entered in results of economic activity at
enterprises (profit) and in increase of financing (funds) - at
institutions;
value of damage and deficit, losses within the bounds of
natural decrease standards, envisaged in relevant normative
documents, is written off on production and circulation cost - at
enteprises, and on reduction of financing (funds) - at
insitutions;
natural decrease standards could be established, but they are
not provided by normative documents, nevertheless the owner could
determine them;
capital stock's, material valuables', money resources' and
other property's value (including their damage, deficit and losses
over natural decrease standards) with establishing their causes
and guilty persons, is put down to the guilty persons (by market
price at the moment the deficit and loss are established). If it
is impossible to establish guilty persons or if the entity
considers the persons guilty but the court refuses to recover the
deficit's and loss' value from him, or deficit and loss are
established but their compensation is impossible (uncollectable),
the indicated amounts are put down to the entity economic
activity's results (losses), and at institutions - these amounts
are written off on reduction of financing (funds);
as amounts on financial liabilities and payments are defined
more precisely, the datas, which are not shown in accounting, are
regulated at the expense of s rise (reduction) of profit (losses)
in the accounting year or at the expence of reserve on doubtful
debts and other analogous purposive funds.

Article 15. Accounting Information Maintenance
1. Accounting registers, internal accounting returns and other
analogous documentation maintenance is a commercial secret. Nobody
may be acquainted with the subject of these documents, unless
otherwise qualified by the permission of the entity's head, bodies
of the court, public prosecutor's office, and in the other cases
provided by the Azerbaijan Republic legislation.
2. Auditors and other inspecting persons that gain access to
accounting information, are obliged to keep a commercial secret
and they bear a responsibility for the divulgence of information
they have learnt.

Article 16. Records Authencity in Accounting
1. Documentally substantiated and properly put in order
records on economic operations in accounting registers are
considered an authentic a priori, if the partcipants of the
operation did not come to understanding about the other or the
other is not proved by the court.
2. Recognition of economic operations on book-keeping accounts
is considered correct, when it corresponds to paragraph 1 of the
present Article and is approved by the resolution of appropriate
inspecting bodies.

Article 17. Maintenance of Registers and Accounting Documents
1. The entity is obliged to maintain initial account
documents, accounting registers and accounting returns.
Maintenance time are determined by the Central Archives Department
at the Cabinet of Ministers of the Azerbaijan Republic.
2. Book-keeping accounts plan, instructions on accounting,
encoding procedures, datas machine processing programmes and their
utilisation rules, are kept in accounting department not less than
five years, with the aim to ensure a possibility to check
accounting procedures used earlier and accounting returns drawn up
on the basis of these procedures.

CHAPTER IV
ENTITY'S PROPERTY

Article 18. Noncurrent Assets and Intangible Assets
1. Labour means being in operation in the sphere of production
(service) of the entity for a period more than one year, are
called Noncurrent Assets. The value of these means is regulated by
normative documents; as the value is amortizated, in accordance
with the standards established by the Law, it turns into product
(service) value while their natural form in the process of
production (services) is retained.
2. Under the category of Noncurrent Assets fall: buildings,
structures, transmitting devices, working power machines
(equipment), control-measuring instruments (devices), computing
machinery, transport means, instrument set, production and
household implement, working and producing live-stock, perennial
plantations, domestic roads, private land plots, investments in
land cultivation (amelioration, drainage, irrigation, etc.) as
well as in other works (aims) and other means (labour means).
3. Completed capital expenditures by leased buildings,
equipment and other Noncurrent Assets, are included by the
leaseholder in the structure of own Noncurrent Assets in the
amount of actual expenditures (if the other is not provided in
rental contract).
4. Land plots being in the entity's ownership, are included in
accounting and returns by actual expenditures for their
acquisition.
5. The entity's Noncurrent Assets are included in accounting
and returns by their original cost, i.e. in the amount of actual
expenditures for their acquisition, assembly and installation.
Original cost of Noncurrent Assets, except of the land plots being
in the entity's ownership, could change when Noncurrent Assets are
revaluated, reconstructed, new construction works are fulfilled,
new equipment is installed and relevant objects of Noncurrent
Assets are partly liquidated.
In the entity's Noncurrent Assets, except of land plots being
in its ownership, there are included production (circulation)
cost, calculated taking into consideration the depreciation
(amortization) for their operation period, accordingly to the
standards established by the legislation.
For completely amortized Noncurrent Assets the depreciation's
calculation is not made.
The accumulated amount of Noncurrent Assets depreciation is
individually shown in accounting and returns.
6. When selling and other cases of exception of Noncurrent
Assets profit or losses by these operations are put on results of
the entity financial activity.
7. In the end of the year for Noncurrent Assets of budget
institutions the depreciation for the accounting year is
calculated. Accordingly to the standards established by the
legislation, the depreciation is calculated for the full year,
regardless of the Noncurrent Assets' acquisition, construction and
installation dates. The depreciation is individually shown in
accounting.
8. Being not classified as Noncurrent Assets, the following
are taken into account in the structure of Current Assets (at
enterprises), and in the structure of the objects of little value
and other valuables:
a) subjects with service time less than 1 year, regardless of
their value;
b) valuables with one-times participation in the process of
production (service), while their value is fully transfered in the
value of product (service) and they don't keep their natural form;
c) labour means, regardless of their service time, with the
unit's and set's value, being below the minimum limit of
Noncurrent Assets' value established by the relevant normative
documents, with exception of farm machines, appliances, mechanized
construction instruments, working and producing live-stock, that
are considered Noncurrent Assets regardless of their value and
service time. The entity's head has the right to fix the low limit
of objects value to fulfil properly their accounting in the
structure of Current Assets in the accounting year. In necessary
cases the indicated limit could change depending on inflation.
d) objects of fishery (trawls, nets of all kinds, etc.),
regardless of their value and service time;
e) mechanized saws, branch-cutting machines, ropes for the
floating, seasonal roads, temporary cableways for timber
transportation, temporary forest shelters for two-years
employment, transportable heating shelters, boiler-rooms and other
means (labour means) of temporary (seasonal) employment;
f) specially made mechanizms and devices for serial and mass
production of individual orders or goods regardless of their
value;
g) working clothes, footwear and also bedding regardless of
their unit's or set's value and service time;
h) temporarily created (titleless) specialized mechanizms,
buildings and other (out of title) structures, which value is
included in a cost of construction-assembly works in a form of
overhead expenses;
i) the container, if its unit, being involved in keeping of
prices for commodity-material valuables at storehouses or in
technological process, has a value below the minimum limit
established by relevant normative documents for Noncurrent Assets
value.
k) object for hire regardless of their value
l) young animals and animals fattened
m) perennial plantations planted at nursery for
transplantation.
9. As labour means and objects provided in paragraph 8 of the
present Article (except of sub-paragraphs "f", "e","m", "n"without
calculation of depreciation), are issued from the entity's
storehouse for exploitation, when 50% of their unit's or set's
value has been written off for depreciation, the rest 50% for
useless for operation period (minus a possible utilisation) is put
down to expenses.
Objects of little value issued for exploitation, if their
unit's or set's value reaches one twentieth of minimum limit
established by appropriate normative documents for Noncurrent
Assets, could be classified as direct expenses. To ensure safety
of these objects when they are used, a proper control of their
movements is organized at the entity.
Value of specially made mechanizms and devices for mass
production of individual orders and goods,is repaid in accordance
with the standards established by the entity. It is permissible to
classify their value as direct expenses.
Value of objects handed in hire, depending of their service
time, is repaid by a way of calculation of their depreciation.
10. Objects and valuables, provided in paragraph 8, are shown
in accounting and returns by their original costs, i.e. by the
amounts of actual expenses for their acquisition, construction and
production. The amount of these objects, and valuables'
depreciation is individually shown in accounting and returns.
11. Under the category of Intangible Assets fall the
following: Rights to use land plots and natural resources, being
realized for a long time in economic activity; patents; licences;
know-how; datas machine processing programmes; monopoly right and
privilege (preferential) right (preferences) (including licences
for special types of activity), organizational expenses,
trademarks, etc.
Intangible Assets are shown in accounting and returns by
expenses for their acquisition and for putting them into the state
suitable for their processing in plan purposes (with original
cost), and while they are used, their value, depending on their
operation terms, is repaid with monthly writting off them to
products (service) value, circulation costs, accordingly to the
depreciation standards established by the entity. If it is
impossible to determine terms of intangible assets' useful
utilisation, depreciation standards for them are established for a
period of 10 years (but not more than the entity's operation
terms). Intangible Assets' depreciation is separately shown in
accounting and returns.

Article 19. Raw materials, materials, finished products
and goods
1. Raw materials, main and auxiliary materials, fuel, received
semi-finished products, completing parts, spare parts, container,
used for product (goods) packing and transportation, and other
material resources are shown in accounting and returns by their
actual prime cost.
Actual prime cost of material resources is established
depending on expenses for their acquisition (minus add-in value
tax), including interest for sale of these resources on credit by
vendors, payment of overhead expenses to supply agencies and
external economic relations organizations, commissions, payments
for commodity stocks services, custom duties, expenses for
transportation and storage of resources by outside organizations,
etc.
Actual prime cost of material resources , being written off
for production, is determined by one of the resources evaluation
methods (by average prime cost; by prime cost of primary acquired
recources; by prime costs of resources acquired later).
2. Finished product is shown in balance by its actual or
planned (normative) prime cost.
3. At merchandising, supply and sale entities, the goods are
shown in accounting and returns by their retail and sale price or
by their purchasing value. When goods stock-taking is fulfilled,
difference between their purchasing value and sale price (reducing
in price, addition) is shown in accounting as a separate line.
When the entity carries out stock-taking of product's (goods',
works', services') sale on the basis of payment documents, as they
are repaid by the buyer (customer), dispatched goods, fulfilled
works, provided services are shown in balance by their full actual
or planned (normative) prime cost, including supply expenditures
which must be paid by recipient (customer) over the cost of the
agreement(contract).
4. Valuables provided by paragraphs 1,2 and 3 of the present
Article, if their cost has been reduced in the course of the year,
if they have become morally obsolete and have partly lost their
former quality, in the end of the accounting year are shown in
balance by their possible sale price, and in the case if the price
is lower than their original purchasing cost, the price difference
is put down to the economic activity results.

Article 20. Fixed Capital under Production and
Prepaid Expenditures
1. Under the category of the Fixed Capital under Production
fall: products (works) which have not passed all stages, (cycles,
periods) envisaged by technological processes and also goods,
being not made up complete, having not passed tests and technical
acceptance procedures.
2. Fixed Capital under Production in mass and serial
production could be shown in balance by its normative (planned)
production prime cost or by items of direct expenses, and also by
raw materials', materials' and semi-finished products' cost.
If product is produced in units, Fixed Capital under
Production is shown in balance by actual production cost.
3. Expenditures which have been sustained in the course of the
accounting period and being classified as expenditures of
forthcoming accounting periods (prepaid expenditures) are shown in
returns in an individual line as Prepaid Expenditures and are put
down either to production and circulation cost for the period
which the expenditures are attributed to or to relevant source of
financing.

Article 21. Funds and Reserves
1. Statutory Capital is formed by a totality of payments (in
terms of money) which were invested when the entity was
established, in amounts determined by statutory documents to
ensure the entity's activity.
Statutory Capital and Actual Indebtness of participants
(owners) by investments in the State Capital are shown
individually in accounting and returns.
2. To cover unforeseen losses the entity, accordingly to the
established order, forms Reserve Fund at the expense of the
profit. Unutilisated balance of the Fund transfers to the next
year.
3. The entity putting reserve amounts down to the economic
activity results, could form Reserve Fund for doubtful debts on
payments with other entities for product, goods, works and
service.
Receivables, being not repaid in the term established by the
contract and having not appropriate guarantees, are considered
doubtful debts.
4. Reserve for Doubtful Debts is formed in the end of the
accounting year by the entity receivables' inventory results.
Reserve amount is determined individually for each doubtful
debt depending on debtor's financial state (solvency) and
probability of full or partly repaiment.
If some part of the reserves is not utilisated to the end of
the year next to the year of their forming, the utilisated amount
is added to the corresponding year's profit.
5. To include steadily forthcoming expenditures in the
structure of production cost or circulation cost the entity could
form a Reserve Fund aimed on payment of impending leaves of the
workers, annual premiums for length of service, expenses for
repairs of noncurrent assets, production cost by preparatory works
in seasonal sectors of industry, impending expenses on repairs of
hire objects, payments depending on general results of the year,
etc. (on the basis of relevant regulations of the Azerbaijan
Republic, the Reserve Fund is included in the structure of
expenditures accordingly to specific features of production of
differerent sectors and is envisaged in prime cost of product,
works and service).

Article 22. Settlements with Debtors and Creditors
1. Settlements with debtors and creditors are shown by each
party in its returns in the amount which is taken from accounting
records and is considered correct by the party. Indebtness on
received bonds is indicated taking into consideration interests
which are to be repaid to the end of the accounting period.
2. Amounts of settlements with financial, tax bodies, bank
institutions which are to be shown in returns, must be identical
and co-ordinated with the organizations. It is not permissible to
keep in balance irregulated amounts by these settlements.
3. Balance of the entity's assets on currency accounts, other
money resources in foreign currency (including financial
documents), securities, accounts receivable and payable are shown
in returns in the Azerbaijan Republic's national currency -
manats, in the amount determined by means of recounting of foreign
currency accordingly to the rate of exchange of the National Bank
of the Azerbaijan Republic by last date of the accounting period.
4. Penalties, fines, forfeits, accepted by debtor or being
subject to recover by the court's, arbitration's verdict, are put
down to economic activity's results and before their receiving or
repaying they are shown in recipient's or debtors' returns in
debtor or creditor items.
5. Accounts receivable with the expired term of limitation,
other uncollected debts by a resolution of the entity's head are
correspondingly put down to reserve resources for doubtful debts
or, if in a period preceding to the accounting one such reserve
has not been formed in the order provided by paragraph 4 of the
present Article, are written off on the economic activity's
results, and at institutions - on reduction of financing (funds).
Writting off indebtness amount as losses through the debtor
insolvency doesn't mean the debts' liquidation. The mentioned
debts would be shown in over-balance accounts during five years
from the moment when they have been written off, to check
possibilities of their recovery if the debtor's property state
changes.
6. Amounts of accounts payable and deponent indebtness with
expired term of limitation are transfered in the State Budget, if
the other is not qualified by the legislation of the Azerbaijan
Republic.
7. Losses which are not compensated in a result of natural
disaster, by a resolution of the entity's head, are written off
either on reserve funds or on results of economic activity for
accounting year (if reserve fund is not been established at the
entity or if it has not sufficient resources), or on reduction of
financing (funds).

Article 23. Entity's Profit (Losses)
1.Balance profit (losses) being a final financial result of
evaluation of items of economic operations balance on the basis of
accounting and in accordance with the present Law, accumulates the
profit (losses) from a sale of Noncurrent Assets and other
entity's property, product (works, service) as well as revenue
from some operations (minus expenditures on the operations).
2. Profit (Losses) from a sale of product (works, service) and
goods is determined as a difference between revenue from a sale of
product (works, service) by acting prices and expenditures for
their production and sale without taxes and other obligatory
payments established by the legislation of the Azerbaijan
Republic.
Revenue from a sale, depending on the entity's economic
peculiarities and terms of concluded contracts, is determined as a
buyer (customer) is provided with payment documents, either for
sold goods, works, service (i.e. by sums received accordingly to
payment documents on the entity's payment or current account in
bank - in case of payment by check, or by sums received by the
entity's cash - in case of cash-payment), or for dispatched
product, goods, works, made available, provided service (unpaid).
3. Profits or Losses revealed in the accounting year but being
attributed to past years operations, are put down to results of
the accounting year's economic activity.
4. Revenue gained in the accounting year, but being attributed
to forthcoming accounting periods, are shown in accounting and
returns in an individual item as precollected revenue. When the
appropriate accounting period has come the revenue would be
included in results of the mentioned period's economic activity.
5. Balance profit (losses) of the accounting period and its
utilisation is shown in the balance individually. In balance
liabilities there are shown gained profit and its utilisitation in
advance, retained profit, and in balance assets - actually
sustained losses. In balance total only incompensated losses or
accounting year's or past years' retained profit are included.

CHAPTER V
VALUATION OF PROPERTY, INVESTING OF CAPITAL AND FINANCE

Article 24. Obligatority of Valuation in Accounting
1. To show properly in accounting and returns its property,
capital , liabilities, current assets, funds and all economic
operations in financial-economic activity, the entity without fail
ensures their proper valuation and, if needed, revaluation, by
their original or restoration cost (in accordance with market
price).
2. Methods of valuation are determined in accordance with the
present Law, accounting standards and other legislative acts of
the Azerbaijan Republic.
3. It is permissible to show in accounting price of property,
capital, liabilities, current assets, funds and all financial-
economic operations in financial-economic activity, as a whole
manat. The differences being formed in that case are put down to
results of economic activity - at enterprises, and to rise
(reduction) of finansing (fund) - at institutions.

Article 25. Accounting Currency
1. The entity carries out a valuation and revaluation of its
property, liabilities, current assets, funds and all economic
operations in financial-economic activity in national currency of
the Azerbaijan Republic.
2. All operations in foreign currency the entity evaluates
accordingly to the rate of exchange of the National Bank of the
Azerbaijan Republic, by the date of the operation fulfilment, and
every time when the rate changes the entity revaluates currencies
on currency accounts.
3. Every time when currency on currency accounts is revaluated
(by types) accordingly to rates of the National Bank of the
Azerbaijan Republic, periodically increased rates difference is
put down to the entity's profit in the end of the accounting year,
if other is not qualified by appropriate normative documents of
the Azerbaijan Republic.
4. Foreign currency operations by bank accounts, liabiliities
and payments as well as material valuables, intangible assets,
securities and other types of property in foreign curency are
shown in accounting and returns in manats, in the amounts
determined by means of recount of foreign currency by rates of
exchange of the National Bank of the Azerbaijan Republic by the
date of the operation fulfilment. Simultaneously the mentioned
records are made in analitycal accounting in settlements and
payments currency.
5. Currency accounts balance in banks and other credit
institutions, other money resources (including financial
documents), securities, accounts receivable and payable in foreign
currency are shown in financial (accounting) returns in manats, in
the amounts determined by means of recount of foreign currency by
rates of exchange of the National Bank of the Azerbaijan Republic
by the last day of the accounting
period.

Article 26. Valuation of Current Assets
1. With the aim to bring its current assets into line with
requirements of reproduction for ensuring of steadily production
activity under conditions of market economy, the entity reliably
evaluates their current assets accordingly to accounting standards
by original or restoration cost (in accordance with market price).
2. The entity has the right, taking into consideration demand
and supply, inflation rates, to establish a Standing Valuating
Committee to ensure a control of proper valuation of its current
assets in accordance with market price and their sale.
3. Valuating Committee documenting, in accordance with
accounting registers, a valuation, and, in necessary cases,
revalution of current assets in reference to market price, timely
presents datas in accounting department.
4. When old stock selling, their value (except of prices
regulated by the State) is determined in the amount not less than
a cost of the last goods with the same title(assortment, sort,
mark), produced by the indicated day.
5. Price rise sum fixed in course of current assets balance's
valuation and, if necessary, revaluation, is put down to the
entity's profit, if the other is not quilified by the Azerbaijan
Rebulic legislation.
6. Losses through quality deterioration and price reduction,
decrease of value of securities being quoted at stock exchanges,
fall in rate of exchage, are put down to the entity's losses, if
the other is not qualified by the Azerbaijan Republic legislation.

Article 27. Valuation of Amortized Property
1. Noncurrent Assets and Intangible Assets are accepted for
accounting by their complete original cost.
2. Noncurrent and Intangible Assets value is repaid by their
depreciation (amortization) standards, calculated proceeding from
their service time or by depreciation (amortization) standards
approved by the Cabinet of Ministers of the Azerbaijan Republic.
By objects of little value depreciation (amortization) is counted
by simplified methods.
3. The entity carries out revaluation of Noncurrent Assets in
the cases envisaged by the Azerbaijan Republic legislation.
When revaluation is carried out, the formed difference between
original restoration cost retains in the entity's disposal, and in
accordance with the Azerbaijan Republic legislation, it is alloted
for necessary aims.
4. By the Ministry of Finance of the Azerbaijan Republic
consent, entities could use standards of intensive depreciation
(amortization) by means of increase (but not more than in twise)
of depreciation (amortization) standards. In the cases when
depreciation(amortization) amounts effect negatively on the
entity's economic activity, by the Ministry of Finance of the
Azerbaijan Republic consent, reducing rates (but not less than
0,5) could be used for depreciation(amortization) standards.
5. Permanent rented noncurrent assets value with the right of
repurchase (if the other is not qualified by the contract), could
be repaid by means of even amortization deductions during the rent
time (except of interests paid to rentier during rent time
accordingly to the contract).

Article 28. Capital and Financial Investments
1. In the structure of investments there are included
expenditures for construction-assembly works, acquisition of
equipment, instrument set, inventory and the others (expenditures
for design-surveying, geolodical-exploitation and boring works,
allotment of land plots for construction and resettlement,
training of specialists for newly built entities, etc.).
Investments are shown in a balance of the organization which
fulfils construction (customer) by amounts of actual expenditures.
2. Capital construction objects being in temporary employment
are not included in the structure of Noncurrent Assets before
their launching. Amounts of expenditures for them are shown in
accounting and returns as Fixed Assets under Construction.
3. Under the category of financial investments fall the
following: the entity's Statutory Fund, its securities, loans to
entities, located at the territory of the Azerbaijan Republic and
beyond its boundaries and other investments.
For investors the investments are counted up in the amounts of
actual expenditures. Difference between actual expenditures for
acquisition of bonds and other noncurrent liabilities and their
nominal price during their circulation time is put down, monthly
and even, to results of economic activity,
If an investor has the right to get dividends, and in the case
when he is responsible for finacial investments, fully paid shares
and stocks are shown in balance assets, and unpaid amounts - in
creditors item in balance liabilities. In other cases amounts,
transfered for acquisition of shares and stocks, are shown in
balance assets in debtors item.
When valuating stocks and the entity's other noncurrent
liabilities at stock exchanges and out-of-stock exchange markets
(regular publication the prices in press), and if they are
repeatedely take part in the market, their value is shown in
annual accounting balance by a last market price, as the
difference between them and the former balance price is put down
to economic activity's results.
4. The entity's Statutory Capital is formed accordingly to the
order established by incorporators, at the expense of their
payments and sale of stocks(shares). Material valuables and
intangible assets, paid to the account of payments in the
Statutory Capital, are valuated by incorporators on the basis of
their real market value.
5. Issue revenue of joint-stock companies (amounts received
over nominal price of issued stocks), amounts from valuation of
the entity's tangible assets, valuables received for the free use
and other analogous amounts are counted up as a supplementary
capital.
6. The entity is entitled to establish, at the expense of its
net profit (profit being retained in the entity's disposal),
reserve funds and reserve capital, and to use them for their
proper purpose. Reserve capital and other reserve funds, retained
profit and uncovered losses are shown in accounting individually.

Article 29. Social Funds
The entity has the right to establish Social Funds at the
expense of the profit retained in its disposal, with the aim of
provision of social aid and satisfaction of other social needs.
The Funds are shown in accounting individaully.

Article 30. Pledges and Guarantees
1.Value of the property (including money resources), which is
handed over in pledge, is counted up by the entity separately from
the other property.
Guarantees given without handing of property or money pledge,
are shown in accounting on the individual over-balance accounts.
2. Value of the property which is taken in pledge, is shown on
the individual over-balance accounts.Money resources and currency
valuables, accepted as a pledge, are counted up on balance
accounts with isolated recognition of received guarantees amounts.

CHAPTER VI
FINANCIAL (ACCOUNTING) RETURNS

Article 31. Structure of Financial(Accounting) Returns
1. Financial returns of entities (except of budget
institutions) on the whole consist of accounting balance and
enclosed returns on financial results (profit and losses) and
their utilisation, on movements of property , funds, current
assets, own capital, money resources (cash-flow), intangible
assets, financial and capital investments and other assets and
liabilities.
The returns in accordance with accounting standards, could be
supplemented with other accounting forms and explanations.
It is prohibited to fulfil mutual counting of items of assets
and liabilities. Outline of financial (accounting)returns' forms
and their filling rules are determined by the Ministry of Finance
of the Azerbaijan Republic.
The Azerbaijan Republic ministries and departments, by the
Ministry of Finance of the Azerbaijan Republic consent, in
addition to the outlined forms, can establish special accounting
forms, corresponding to specific features of entities in their
system.
2. Bank, insurance, tax and other state bodies approve
instructions on keeping of initial accounting, financial
(accounting) returns, their filling rules, by the Ministry of
Finance of the Azerbaijan Republic consent.
3. Entities in explanations to their financial (accounting)
returns show a complete and clear analysis of their production,
financial-economic activity and information on changes in their
accounting policy in each accounting year.

Article 32. Accounting Period
Period January,1 to December,31, inclusive, is considered an
accounting period for all entities. The first accounting period
for entities newly established during the year is considered a
period from the date of their receiving a status of a juridical
person to December, 31 inclusive, and for entities newly
established after October,1 (not on the base of liquidated,
reorganized entities and their structural units)- period to
December, 31 inclusive.

Article 33. Corrections in Financial (Accounting) Returns
Accounting datas are based on datas of synthetic and
analytical accounting.
Introductory balance datas must correspond to datas of
approved total balance of the period, preceding the accounting
period. If an introductory balance changes to January,1 of the
accounting year, the causes must be explained. If corrections are
found in accounting returns either for the current year or for the
last year (after returns approval), corrections are made in the
return which was prepared for the accounting year, which the
distortation was found for. Corrections of mistakes in accounting
is confirmed by signatures of persons signing it with indication
of the correction date.

Article 34. Order of Financial (Acconting)
Returns Presentation
1. The entity's Accounting (Financial) Return for the
accounting period (month, quarter, year) is a final stage of
accounting process. In the return movements of property, current
and intangible assets and other assets and liabilities on the
whole by the balance items, financial state and economic
activity's results are shown (by increasing sum).
Entities (except of entities with foreign investments) present
quarterly and annual returns to:
owners (participants, incorporators - in accordance with
statutory documents);
State Tax Inspectorate bodies;
State Statistics bodies;
other State bodies which are placed, by the Azebaijan Republic
legislation, with duties on control of some parts of the entity's
activity and on receipt of relevant returns.
Entities being in full or partial State and Municipal
property, present quarterly and annual financial (accounting)
returns, besides of bodies envisaged by the present Law, also to
bodies being authorized to manage State or Municipal property.
Entities' financial (accounting) returns are directed to other
address, if it is provided in the statutory documents or in the
Azerbaijan Republic legislation.
2. Tax Return (Declaration) and other tax returns are
presented to Tax Inspectorate of the place where the entity is
located.
3. Entities present quarterly financial (accounting) returns
not later than 30 days after the quarter end, and annual
accounting - not later than 90 days after the year end.
4. Budget institutions present monthly, quarterly and annual
financial returns to higher-level bodies in terms established by
the bodies.
The exact date of financial (accounting) returns presentation,
within the bounds of the mentioned terms, is established by the
entity incorporators (participants) or higher-level bodies, which
the entity is accountable to, or by state bodies being entitled to
get returns.
Entities with foreign investments present annual financial
(accounting) returns to March, 15 of the year next to the
accounting period, in the order envisaged in statutory documents.
The returns are presented to each participant (owner), State Tax
Inspectorate bodies and State Statistics bodies, to the above
date.
5. Ministries, departments and other administration bodies,
financed from the budget, present to the Ministry of Finance, in
established terms, annual summary financial (accounting) returns
on execution of expenditures estimates of budget institutions.
Ministries and departments of the Azerbaijan Republic present
summary quarterly accounting returns by subordinate organizations
to the Ministry of Economy, Ministry of Finance, State Statistics
Committee and Central State Tax Inspectorate of the Azerbaijan
Republic not later than 45 days after the accounting period end,
and annual accounting - not later than April, 25 after the
accounting year.

Article 35. Financial (Accounting) Returns Publication
The entity's Financial (Accounting) Returns after approval of
their correctness and authencity by relevant independent
controlling bodies, could be published for juridical and physical
persons as well as for all the concerning users, participants and
other bodies.

Article 36. Financial (Accounting) Returns
of Liquidated Entitties
Being liquidated accorgingly to the established order, in
accordance with the Azerbaijan Republic legislation (bankruptcy,
voluntary liquidation and other reasons), the entity forms final
summary financial (accounting) returns by the date the bakruptcy
is declared by the court, or by the date established when passing
a resolution on bakruptcy.
Responsibility for registration of the entity's liquidation
operations, for praparation of liquidation balance and financial
(accounting) retuns, bears a Liquidation Committee which carries
our the entity's liquidation.
The entity's property is shown by price fixed by a Liquidation
Committee (i.e. by price of its possible sale taking into
consideration its actual marketable state).
Bad debts and losses are not included in liquidation balance.
The liquidated entity's liabilities are defined more precisely
and are shown in liquidation balance in equal persentage from the
date of their repayment.

CHAPTER VII
REGULATION OF ACCOUNTING AND RETURNS

Article 37. Bodies carrying regulation
of accounting and returns
1. In the Azerbaijan Republic permanent development,
improvement and control of accounting and returns systems carried
out by the Ministry of Finance with participation of relevant
bodies.
2. National Bank, State Statistics Committee of the Azerbaijan
Republic, State Insurance Inspectorate at the Cabinet of Ministers
of the Azerbaijan Republic, Central State Tax Inspectorate and, in
accordance with the Azerbaijan Republic legislation, other bodies,
by the Ministry of Finance of the Azerbaijan Republic consent,
regulate accounting and returns of banks, insurance organizations
and other analogous bodies as well as other managing objects which
perform special functions.
3. Formation and circulation of new normative acts in the
field of accounting, their forms and requisites in the Azerbaijan
Republic couldn't realized without the Ministry of Finance of the
Azerbaijan Republic consent.

Article 38. Objectives and Goals of Accounting
and Returns Regulation
1. Accounting and Returns State Regulation's main objective is
a formation of the united accounting system in the Azerbaijan
Republic, which is provided with appropriate legal and methodical
basis, accounting and returns forms, and meets international
principles of accounting and returns.
The objective of accounting and returns regulation is to
provide concerning juridical and physical persons with comparative
information on state of property and financial conditions, on
profit and losses of the entity.
2. Main goals of Accounting and returns regulation are:
a) forming simple, obligatory and united standards on
accounting and returns as a guarantee of protection of interests
of participants of economic processes;
b) establishing obligatory normative prescriptions as a legal
basis for formation and utilisation of special accounting
information in the interests of State bodies, owners and other
users;
c) determining a legal status of professional workers being
engaged in accounting and returns;
d) developing the national accounting and returns in
accordance with the principles adopted by the international
community.

Article 39. Public Unions of Accountants
In accordance with legislation of the Azerbaijan Republic,
Public Unions of Accountants could be established to protect their
interests.

Article 40. Control on Observance of Legislation
and Accounting Standards
1. Control on observance of legislation on accounting and its
standards in the Azerbaijan Republic is carried out by the
Ministry of Finance, other State bodies of the Azerbaijan
Republic, by entities administration and domestic controllers.
2. Auditorial organizations and other controlling bodies when
carrying out control, check up keeping of accounting in accordance
with the present Law, accounting standards and other normative
documents.
3. Ministries and departments, drawning up summary
accounting(financial) returns, revize financial-economic activity
of subordinate enterprises and organizations and their accounting
state, not less than once in three years.
4. Juridical persons inspect, on the systematic basis, an
accounting of subordinate organizations (picked out on independent
balance), missions, branches,departments, production sections,
farms and other units.

Article 41. Responsibility for infringement of legislation
on accounting
1. In regard to juridical persons and other managing subjects
ifringing the present Law, deviating from keeping of accounting,
irregularly using accounting standards and also premediately
distorting financial returns, sunctions provided by the Azerbaijan
Republic Legislation are applied.
2. Persons responsible for keeping of accounting in accordance
with Paragraph 1 of Article 9 and Paragraph 1 of article 12 of the
present Law bear a responsibility established by the Azerbaijan
Republic legislation for infringement of the legislation on
accounting.

President of the
Azerbaijan Republic
Heydar Aliyev
Baku
March 24, 1995
N 998