(2022-11-23-ны өдрийн орчуулгын хяналт)                                      Unofficial translation

LAW OF MONGOLIA

June 19, 2015                                      Ulaanbaatar city

ON ACCOUNTING

/Revised Edition/

CHAPTER ONE

GENERAL PROVISION

Article 1.The Purpose of the law

1.1.The purpose of this Law is to define the accounting principles, the legal basis of management and organization, to regulate the relations with respect to the bookkeeping and preparation of financial statements of a business entity and organization, and to monitor the accounting activities.

Article 2.Accounting Legislation

2.1.The accounting legislation shall consist of the Constitution of Mongolia and other legislative acts enacted in conformity with this law.

2.2.If an international treaty, to which Mongolia is a party, provides otherwise than this Law, the provisions of the international treaty shall prevail.

Article 3.Definition of terms of the law

3.1.The terms used in this law shall have meanings as follows:

3.1.1."Accrual basis of accounting" means the method of recognizing and recording revenue as debited when earned and expenses when incurred  regardless of when actual payments are received or made; 

3.1.2."Double entry" means the dual records of transactions in both debit and credit accounts; "

3.1.3."Primary accounting document" means agreements, invoices, payment slips, and other evidence collected for confirming incurred transactions;

3.1.4."Journal" means a chronological record of the transactions before the entry into the general ledger;

3.1.5."General ledger" means all accounts, which comprise the financial statement of a business entity or organization;

3.1.6."Professional accountant" means an individual who has graduated from a university or college as an accountant with a bachelor's degree or higher;

3.1.7."Certified public accountant" is a professional accountant, financier or economist who is authorized as a certified public accountant;

3.1.8."General accountant" means a professional accountant appointed by the management of a business entity or organization and is responsible for maintaining and organizing the accounting records;

3.1.9."Accounting policy document" means a document containing procedures, guidance and methodology, which determines the accounting principles governing the preparation of financial statements and the accounting basis;

3.1.10."Relevant financial agency" means a financial agency in affiliation with the state central administrative body in charge of finance and accounting or with the Governors of Aimag and capital city;

3.1.11."Consolidated financial statement" means a financial statement stipulated in Article 6.4 of the Company Law;

3.1.12."Executive management" means the following persons:

3.1.12.а.a person specified in Article 83 of Company Law; and;

3.1.12.b.for legal entities other than companies, a person defined as the executive management in the charter of such legal entity.

3.1.13."The Institute" means an organization which ensures compliance with Articles 24-26 of this law in accordance with Article 19 of the Law on Government of Mongolia, and is authorized to represent Mongolia to the Association of International Accountants;

3.1.14."Contracted accountant" means a professional accountant authorized to provide accounting and professional consulting services on a contractual basis;

/This sub-paragraph was added according to the law as of January 17, 2020/

3.1.15."Organization providing professional accounting consultancy services" means a legal entity authorized to provide professional accounting consultancy services on a contractual basis. 

/This sub-paragraph was added according to the law as of January 17, 2020/

CHAPTER TWO

ACCOUNTING PRINCIPLES AND STANDARD

Article 4.Accounting standard

4.1.A business entity and organization shall comply with the following standards: 

4.1.1.International Financial Reporting Standard;

4.1.2.International Financial Reporting Standard for small and medium entities;

4.1.3.International Public Sector Accounting Standard.

4.2.Classification and requirements for entities which shall comply with Article 4.1.1 of this law shall be established and publicized by a government member in charge of finance and accounting. This classification shall include the following entities:

4.2.1.any joint stock companies listed in a local or international stock exchange;

4.2.2.a company which has applied for a listing in a local or international stock exchange;

4.2.3.entities that hold a permit stipulated in Articles 8.1.2, 8.1.6, 8.1.8.6, 8.1.8.14, 8.1.8.15, and 8.2.2 of the Law on Permit;

/This sub-paragraph was amended according to the law as of June 17, 2022/

4.2.4.state or locally owned entities and entities which have state or local ownership participation; 

4.2.5.public service entities that supply electricity, heating, or water; 

4.2.6.political parties and non-governmental organizations performing governmental functions on a contractual basis in accordance with Article 19 of the Law on the Government of Mongolia;

4.2.7.a business entity and organization operating in the sectors of commercial banking, as a special purpose company or investment funds and virtual asset service.

/The amendment to this sub-paragraph was made according to the law as of  December 17, 2021/

4.3.Standard stipulated in Article 4.1.2 of this law shall apply to business entity and organization that satisfies the requirements specified in Article 5.1 of the Law on Small and Medium Enterprises. 

4.4.Standard stipulated in Article 4.1.3 of this law shall apply to the agencies specified in Article 4.1.34 of the Law on Budgets.

Article 41.General Duty of Accountant

41.1.Accountant shall comply with the legislation of Mongolia in professional operation.

/This article was added according to the law as of  January 17, 2020/

Article 5.Accounting principles

5.1.A business entity and organization shall follow the following accounting principles:

5.1.1.to be independent; 

5.1.2.to be continuous;

5.1.3.to be based on genuine implementation;

5.1.4.to be accurate;

5.1.5.to be measurable;

5.1.6.to be coherent.

Article 6.Accounting basis

6.1.A business entity and organization shall carry out their bookkeeping on an accrual basis.

Article 7.Accounting language and currency

7.1.A business entity, organization, foreign business entity and a representative office operating in the territory of Mongolia shall carry out their bookkeeping in Mongolian language. 

7.2.A business entity operating in the territory of Mongolia shall record and report its transactions in the national currency.

7.3.A business entity, organization and their representative office may record their transactions in foreign currencies upon having the consent of the state central administrative body in charge of finance and accounting. In this case, items in their financial statements shall be expressed and reported in tugrik, the national currency.

CHAPTER THREE

ACCOUNTING RECORDS

Article 8.Financial statement

8.1.The financial statements of a business entity and organization subject to the accounting and reporting obligations of International Financial Reporting Standard  shall consist of the following components: 

8.1.1.balance sheet;

8.1.2.comprehensive income statement;

8.1.3.equity changes statement;

8.1.4.cash flow statement;

8.1.5.note to the financial statements.

8.2.Agencies stated in Article 4.4 of this law shall carry out the accounting and reporting in accordance with Article 26.3 of the Law on Budgets.

8.3.A business entity and organization with one or more subsidiaries shall prepare a consolidated financial statement provided in Article 3.1.11 of this law. In the case of a continuing relationship where the subsidiaries have sub-subsidiaries then the ultimate parent company shall prepare the consolidated financial statement. If the ultimate parent company is registered in a foreign country, then the ultimate parent company registered in Mongolia among its subsidiaries shall prepare the consolidated interim financial statement. 

8.4.Financial statements shall be signed and stamped /sealed/ by the executive management and chief accountant of the business entity, and the executive management shall be responsible for the accuracy of the financial statements.

Article 9.Submitting financial statement

9.1.A business entity and organization shall submit its financial statement electronically to the relevant financial agency within a period provided by this law. 

9.2.The relevant financial agency which received the financial statement electronically shall be responsible for the following obligations: 

9.2.1.monitoring whether a financial statement is submitted within the time prescribed by this law; 

9.2.2.monitoring whether it is prepared by a professional or certified public accountant; 

9.2.3.processing the data stated in the financial statement for the purposes of statistic survey.

9.3.Information stated in the financial statement shall be disclosed to interested persons in the following cases:

9.3.1.to a person who has requested the financial statement information of business entity and organization subject to a standard specified in Article 4.1.1 of this law; 

9.3.2.to any interested person if consented to by the management of such a business entity and organization. 

9.4.A budget institution shall prepare and submit their financial statements in accordance with Article 8 of the Law on Budgets.

9.5.The financial statement of a business entity and organization to be submitted electronically to the relevant financial agency shall be electronically signed and confirmed by the executive management or chief accountant.

9.6.The relevant authorities shall settle the tax, premium and fees based on the electronic financial statements certified by the corresponding financial institution. Moreover, competent authorities shall use the certified financial statements and clarifications of the business entity provided in the electronic database. 

9.7.A business entity and organization may disclose only the audited annual financial statements and its auditor's report by uploading these to its website.

Article 10.Financial statement year and financial statement due date

10.1.The financial statement year of a business entity and organization shall commence on 1 January and end on 31 December of each year.

10.2.The first financial statement year of a newly established business entity and organization shall commence on a day of the state registration and shall end on 31 December of that year. 

10.3.The first semi-annual financial statement of business entity and organization subject to the standards specified in Article 4.1.1 of this law shall be submitted by 20 July, and the annual financial statement shall be submitted by 10 February of the following year in an electronic format to the relevant financial agency.

10.4.A business entity and organization which is subject to preparing a consolidated financial statement shall deliver its annual financial statement by 1 March of the following year in an electronic format to the parent company's relevant financial agency.

10.5.A business entity and organization except those specified in Article 10.3 of this law and those participating in consolidated financial statement as specified in Article 10.4 of this law shall submit its annual financial statement by 10 February of the following year in an electronic format to the relevant financial agency.

10.6.Financial agencies in affiliation of the Governors of Aimags or capital city shall deliver consolidated annual financial statements of the relevant business entities and organizations by 20 March of the following year to the state central administrative body in charge of finance and accounting.

Article 11.Preserving the accounting documents and financial statements

11.1.A business entity and organization shall preserve its accounting documents and financial statements for not less than 10 years unless otherwise stated in the legislation on Archives and Official Documentation. 

/The amendment to this paragraph was made according to the law as of April 24, 2020/

Article 12.Inventory of assets and settlements

12.1.The executive management and chief accountant of a business entity and organization shall be responsible for organizing the inventory of the assets and settlements. 

12.2.It is mandatory to do inventory of assets and settlement in the following cases:

12.2.1.prior to preparing the annual financial statement; 

12.2.2.in times of replacement of a stockkeeper and employee dealing with the inventory of the properties; 

12.2.3.in case of missing properties or deemed illegal disposal of properties; 

12.2.4.after being affected by a disaster, dangerous phenomenon or accident;

/This sub-paragraph was amended according to the law as of February 2, 2017/

12.2.5.a decision is made regarding the reorganization or liquidation of a business entity and organization, or when the bankruptcy case has been initiated;

12.2.6.other cases provided by law. 

12.3.Inventory of the state assets and settlements shall be carried out within the period specified in the Law on State and Local Property and other laws, or when it is inevitably required.

12.4.A business entity and organization which is state-owned, or which have state ownership participation shall calculate the lost or missing assets based on whichever the higher of their cost or market value.

Article 13.Primary accounting documents

13.1.The primary accounting documents shall be the basis for preparing accurate bookkeeping, financial statement and information. 

13.2.A cabinet member in charge of finance and accounting shall approve the forms and compilation methodology of the primary accounting documents to be commonly followed by business entities and organizations.

13.3.Except for those prescribed in Article 14.2 of this law, a business entity and organization may use internal documents and forms which are appropriate for the nature its activities subject to the approval of its governing body specified in the charter. 

13.4.The executive management and accountants of a business entity and organization shall make a written and electronic entry in the primary documents and confirm every movement and change of assets and resources that occurred within the scope of production and service stages and business activities.

13.5.The primary accounting documents shall become valid when they are signed and affixed with a seal by the persons who have prepared, accepted, or approved them. The primary accounting documents which have been prepared electronically shall be verified by an electronic signature. 

13.6.An employee who has prepared, accepted or received after inspecting the primary document shall be responsible for the accuracy of the primary accounting documents. 

13.7.It is prohibited to record and reflect the work and transactions in the financial statement that have no primary accounting documents.

Article 14.Bookkeeping

14.1.Business entities, organizations and representative offices of foreign business entities and organizations operating within the territory of Mongolia shall carry out the bookkeeping and issue financial statements. 

14.2.A business entity shall apply the double entry bookkeeping method. 

14.3.The processing of accounting information shall be undertaken in the following order: 

14.3.1.preparing the primary accounting documents; 

14.3.2.making journal entries; 

14.3.3.keeping the detailed and general ledger accounts;

14.3.4.preparing report of the works and transactions;

14.3.5.preparing financial statements.

14.4.The followings shall be recorded in the bookkeeping:

14.4.1.all business works and transactions; 

14.4.2.all assets, investments, and receivables; 

14.4.3.all liabilities; 

14.4.4.financial resources of business operations; 

14.4.5.all revenues;

14.4.6.all expenses; and

14.4.7.other items prescribed by International Accounting Standards. 

14.5.The relevant primary accounting documents for the works and transactions of a business entity and organization registration forms shall be kept along with the other documents and forms regardless of in which territory or country the transaction was made.

Article 15.Correcting the accounting errors

15.1.Correction of errors which have occurred during the preparation of accounting records shall be made based on documents and reports reflecting the reason for such error and the methods of correction, and it shall be verified by the signature of officers who approved and made the correction. 

15.2.An accounting error shall be corrected by reflecting the error in the financial statement of that reporting period.

Article 16.Right to demand additional financial information and clarification

16.1.The following authorities and such other persons authorized by law have a right to demand additional explanation and clarification regarding the items stated in the financial statement:

16.1.1.a relevant financial agency;

16.1.2.state and non-governmental organizations that oversee and regulate banking and financial markets.

16.2.The chief accountant of a business entity and organization shall provide an additional explanation and clarification if requested by persons referred in Article 16.1 of this law in a timely manner, accurately and completely.

CHAPTER FOUR

MANAGEMENT AND ORGANIZATION OF ACCOUNTING

Article 17.Management structure of accounting

17.1.The state central administrative body in charge of finance and accounting shall implement the following functions: 

17.1.1.to implement, manage and organize a united policy on accounting, auditing, certified tax consulting and asset evaluation at the national level;

17.1.2.to organize and monitor the implementation of relevant legislation;

17.1.3.to approve and implement the national and relevant accounting standards and procedures for business entities and organizations;

17.1.4.to approve and implement the economic sector accounting regulations, guidance, methodology and forms jointly with the relevant state administrative central body; 

17.1.5.to determine the procedures for the electronic submission of financial statements to the relevant financial agencies and use of consolidated information, and consolidate the financial statements of business entities and organizations nationwide, conduct surveys and draw conclusions;

17.1.6.to cooperate with the state central administrative body in charge of education with respect to monitoring training programs for the preparation of accounting professionals and qualification; 

17.1.7.to monitor jointly with the relevant financial agency the compliance with International Financial Reporting Standard by the business entities and organizations subject to it;

17.1.8.to monitor the operations of a non-governmental organization which has been delegated with some of the accounting functions on a contractual basis pursuant to Article 19 of the Law on the Government of Mongolia; 

17.1.9.to adopt the regulation on the granting and extending of authorization of certified public accountants and approve the examination committee members; 

17.1.10.to approve the regulation on the granting of authorization of a certified public accountant to the individual who have passed the relevant examinations organized in Mongolia or overseas by internationally recognized organizations;

17.1.11.to publicize permitted accounting software to be used by business entities and organizations operating in the territory of Mongolia.

17.2.Within the structure of the state central administrative body in charge of financial and accounting, it shall have departments responsible for accounting, auditing, certified tax consulting, evaluation policy and methodology.

Article 18.Management and organization of accounting for a business entity

18.1.The executive management of a business entity and organization shall be responsible for the management and organization of accounting. 

18.2.The management of a business entity and organization shall approve and comply with the accounting policy document which complies with the accounting legislation, standards, rules, regulations, and guidance. 

18.3.A person who handles accounting and prepare the financial statements of a business entity or organization shall be a professional or a certified public accountant.

18.4.A business entity and organization may hire a contracted accountant or receive professional accounting consultancy service. 

18.5.An accountant or contracted accountant being hired or employed by a business entity and organization with the vacancy of one accountant shall act as the chief accountant. 

18.6.An organization providing a professional consultancy service shall appoint a person who shall exercise the rights and obligations of the chief accountant of the business entity or organization. 

18.7.Article 18.3 of this law shall not apply to the executive management of business entity and organization other than those subject to the standards stipulated in Article 4.1.1 of this law, if he/she is a professional or certified public accountant. 

18.8.A contract for professional consultancy services shall include the rights, obligations, and liabilities of the chief accountant appointed as per Article 18.6 of this law along with matters related to potential disputes that may arise during the  consultancy service. 

18.9.The Institute shall issue a permit to conduct accounting operations and to provide professional consultancy services on a contractual basis.

/This paragraph was added according to the law as of January 17, 2020/

18.10.Failure to comply with legislation of Mongolia when providing accounting and professional consultancy services shall serve as the ground to revoke the permit by the Institution.

/This paragraph was added according to the law as of January 17, 2020/

Article 19.Internal monitoring of accounting

19.1.An authorized person of a business entity and organization shall determine the policy, the management, and the organization of the internal monitoring of accounting. 

19.2.Business entity and organization subject to the standards stated in Article 4.1.1 of this law may have their own internal auditing unit.

Article 20.Rights and duties of a chief accountant

20.1.The chief accountant of a business entity and organization shall have professional skills and the following powers: 

20.1.1.to demand primary accounting documents, other related documents, data and information within the specified timeframe;

20.1.2.to refuse to implement any decision inconsistent with international accounting standards and legislation; 

20.1.3.to countersign on revenue and expense documents and financial statements of a business entity and organization; 

20.1.4.to refuse to record a work and transaction where the primary document is invalid or the transactions are not verified by the primary documents;

20.1.5.to file a request to the relevant authority in order to protect their rights, in the case of the unreasonable imposition of liabilities or dismissal by the management of a business entity and organization in relation to the implementation of his/her rights provided under this law.

20.2.A chief accountant shall have the following duties: 

20.2.1.to implement the lawful requirements set out by the authorized persons specified in Article 17.1 of this law, in a complete and timely manner;

20.2.2.to prepare, get approval on and organize the implementation of the accounting policy of a business entity and organization;

20.2.3.to carry out the accounting and prepare the financial statement in accordance with the relevant international standards, regulations, standards and guidance, approved by the competent state authority and principles stipulated in Article 6 of this law; 

20.2.4.to review whether the accounting is handled in compliance with the requirements provided for under this law and other financial legislation;

20.2.5.to review the account's payables, receivables, and payments, and to review and verify before a work and transactions is made;

20.2.6.to perform inventory of assets and settlements, and resolve the results of the inventory, to make payments to suppliers and buyers and to organize and manage the verification and documentation of the remainder; 

20.2.7.to examine and monitor the calculations of tax, payments, fees and premiums payable by a business entity and organization and to receive a professional advice service and assistance;

20.2.8.to provide with professional assistance in accounting related matters to the management of a business entity and organization;

20.2.9.to organize the provision of timely and accurate information to the management and users of the financial statements of a business entity and organization;

20.2.10.to review the correction of the accounting errors of the recording in a professional level as recommended by the auditing organization and introduce it to the management, and if approved, to make correction to the annual or quarterly financial statement, or to the relevant period subject to management's approval and if not approved, to submit a reasonable statement to the auditor; 

20.2.11.to monitor the work performance of accountants working under her/his direct supervision and to take measures to qualify and train them;

20.2.12.to deliver the financial statement of a business entity and organization to an authorized body under this law and within the period stipulated by the law; 

20.2.13.to comply with the professional code of ethics approved by the authorized body.

Article 21.Accounting and Auditing Standards Committee

21.1.Accounting and Auditing Standards Committee shall comprise of not less than nine members qualified in accounting and auditing and are appointed by the resolution of the Cabinet member in charge of finance and accounting.

21.2.Regulations on the activities and financing of Accounting and Auditing Standards Committee shall be approved by the Cabinet member in charge of finance and accounting.

21.3.Accounting and Auditing  Standards Committee shall have following functions:

21.3.1.to review the official translation of International Financial Reporting Standard and International Accounting Standard and to approve the interpretation to apply and recommendations; 

21.3.2.to deliver a national accounting and relevant standards and regulations to the cabinet member in charge of finance and accounting for review and approval;

21.3.3.other functions as determined by the operating regulations of the Accounting and Auditing Standards Committee.

Article 22.State inspector of accounting

22.1.There shall be a state inspector authorized to monitor the implementation of the Law on Accounting and the Law on Audit. The State inspector shall be classified as a state chief inspector, state senior inspector and state inspector. 

22.2.The Government shall grant the title of a state chief inspector of accounting. 

22.3.A state chief inspector shall grant the title of a state senior inspector and state inspector of accounting. 

22.4.A state senior inspector and state inspector shall be certified public accountant. 

22.5.A state inspector of accounting shall use printed penalty sheets and form of the penalty sheet shall be approved by the cabinet member in charge of the finance and accounting.

22.6.The Government shall adopt a regulation regarding the state inspector of accounting.

Article 23.Additional salary and bonus for accounting employees

23.1.Pursuant to a management decision of a legal entity and organization, an additional salary may be granted to the certified accounting employees.

23.2.A bonus may be granted to the accounting employee who has worked with effective performance.

CHAPTER FIVE

CERTIFIED PUBLIC ACCOUNTANT

Article 24.Eligibility criteria of certified public accountant examination

24.1.A person who is taking the examination for a certified public accountant shall meet the following requirements:

24.1.1.to be graduated from a university with a bachelor's or higher degree in accounting and worked as an accountant for not less than two years; or

24.1.2.to be completed the professional training program in accounting of an university or college, and graduated with a bachelor's or higher degree in finance, economics or management and worked as an accountant for not less than four years.

Article 25.Title of a certified public accountant and its revocation

25.1.The certified public accountant  title shall be granted for four years upon passing the first level exam, and for an indefinite period upon passing the second level examination. 

25.2.The certified public accountant title shall be revoked in the following cases as per the decision of the Board of the Institute: 

25.2.1.if deceased; 

25.2.2.if refused by himself/herself; 

25.2.3.if failed to pass the next level examination or have not taken the next level examination within two years without a justifiable reason; 

25.2.4.if it was established that he/she has breached the professional code of ethics of the certified public accountant, legislation and relevant standards.

25.3.It is prohibited for an individual, whose certified public accountant title has been revoked to take the certified public accountant examination within one year.

Article 26.Functions of the Institute

26.1.The Institute shall implement the following functions as per the decision and agreement set forth in Article 17.1.8 of this law:

26.1.1.to grant the certified public accountant title and to organize continuous qualification trainings; 

26.1.2.to approve the code of ethics of certified public accountant  and auditors and to monitoring its implementation; 

26.1.3.to translate the International Standards on Accounting and Audit and their amendments thereof, to draft the national standards and to draft an interpretation to apply and guidelines; 

26.1.4.to provide methodological management, advice and information to auditing legal entities;

26.1.5.to develop reporting methodology that provides for the correlation between strategy, governance, performance and perspective of business entities and organizations;

26.1.6.to revoke the certified public accountant title of auditors who have breached the code of ethics and operational standards of auditors; 

26.1.7.to supervise and enforce the party set out in 4.1.9 of the Law against Money Laundering and Terrorism Financing to fulfil the obligation set out in that law.

/This sub-paragraph was added according to the law as of October 10, 2019./

CHAPTER SIX

MISCELLANEOUS

Article 27.Liability for the violators of the law

27.1.In case the actions of a civil servant violating this Law have not a criminal nature, they shall be subject to liability specified in the Law on Civil Service.

27.2.Any person or legal entity violating this Law shall be subject to liability specified in the Criminal Law or the Law on Violations.

/This Article was modified according to the law as of December 4, 2015/

Article 28.Entry into force of the law

28.1.This law shall enter into force on January 1, 2016.

CHAIRMAN OF THE STATE GREAT KHURAL OF MONGOLIA ENKHBOLD.Z