Georgia

The main legislation establishing corporate financial reporting requirements in Georgia includes the Law of the Republic of Georgia on Entrepreneurs of August 2, 2021 and the Law on Accounting, Auditing and Reporting No. 5386 of 2016. The Law on Entrepreneurs sets the basic financial reporting framework for all commercial entities in Georgia, while the Law on Accounting, Reporting and Auditing establishes the detailed accounting and auditing requirements.

The Law on Accounting, Reporting, and Auditing differentiates between four categories of reporting entities based on their size (total assets, revenues, and number of employees) and also defines public-interest entities (PIEs), which include listed entities, banks, micro-finance institutions, credit unions, investment funds, insurance companies, among other types of entities.

PIEs and large enterprises (first category) are required to apply IFRS as issued by the IASB and translated by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance within 6 months from their issuance. Application of the English version of IFRS is permitted. Small and Medium-sized entities (second and the third categories) may apply either IFRS for SMEs or full IFRS. Micro entities (fourth category) and non-entrepreneurial (non-profit) legal entities are permitted to apply IFRS, IFRS for SMEs or the standard set by the SARAS.

The Law on Accounting, Reporting and Auditing also establishes mandatory audit requirements for PIEs and enterprises in the first and second categories. The third and fourth categories of enterprises and non-entrepreneurial (non-profit) legal entities are exempt from the obligation to have audit of financial statements, unless provided otherwise in the legislation. All statutory audits must be conducted in accordance with ISA as issued by the IAASB and translated by SARAS within 6 months from their issuance. Application of the English version of ISA is permitted.

The Law on Accounting, Auditing and Reporting No. 5386 (Law No. 5386) restricts the exercise of the accountancy profession to individuals and entities that meet professional certification and continuous education requirements established by the law and further detailed by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance.

Certified Accountants

The law recognizes the qualification of a Certified Accountant, who is defined as an individual certified by a professional organization in accordance with the Professional Certification Standard set by SARAS or is recognized as such under the Law No. 5386, and who can prove their qualification after certification in accordance with the Continuous Education Standard. Certified accountants must be members of one of the professional organizations.

The Professional Certification Standard defines the subjects for professional certification, the rules for carrying out the exam process, the rules for exemption from exams and tests, the documents to be submitted for professional certification and the rule on certificate issuance. Professional certification is conducted by professional organizations whose certification programs or/ and examination procedures meet the standards set by SARAS and which are recognized in accordance with the SARAS Order on Approving Procedure for Recognition of Certification Programs and Examination Process, 2017.

According to the SARAS website, SARAS recognized certification programs of two professional organizations: the Georgian Federation of Professional Accountants and Auditors (GFPAA), and the Georgian Federation of Auditors, Accountants and Financial Managers (GFAAFM). Only GFPAA is authorized to conduct examinations.

The Continuous Education Standard defines continuous education programs and the continuous education procedures and authorizes recognized professional organizations to implement and monitor continuous education. According to the SARAS website, GFPAA and GFAAFM are authorized to conduct CPD.

Auditors

To provide auditing services, certified accountants and audit firms must be registered with SARAS. Auditors must satisfy the following requirements: (i) be a certified accountant; (ii) have at least three years of supervised practical experience; (iii) be a member of professional organization; and (iv) comply with the IESBA Code of Ethics as evidenced by the professional organization or the auditor attesting to the practical experience. SARAS is also entitled to register an individual, who is a full member of a professional organization that is a member of IFAC from the OECD and EU member states, provided they passed a qualification test in Georgian Law.

Other

Accountancy professionals other than certified accountants may voluntarily join a professional organization, which establish internal rules and procedures for regulating their members.

Regulatory Bodies

With the adoption of the Law on Accounting, Auditing and Reporting No. 5386 (Law No. 5386) in 2016, certified accountants are now regulated by the SARAS, with certain functions delegated to recognized professional organizations.

SARAS is responsible for: (i) promulgation of standards, including their translation into Georgian, such as IFRS, IFRS for SMEs, ISA, IESBA Code of Ethics, and defining financial reporting standards for micro and not profit entities; (ii) defining rules and requirements for auditing; (iii) defining rules for audit quality control system and its monitoring; (iv) monitoring quality control system of auditors/ audit firms registered in the auditors’ registry; (v) defining requirements for professional certification, examination procedures, and continuous education of certified accountants in accordance with IES, EU Directives and approving respective standards; (vi) setting rules for recognition of certification programs, examination procedures and continuous education programs and their recognition; (vii) overseeing professional organizations, examination bodies and other persons engaged in professional educational activities; (viii) maintaining the registries of auditors and audit firms, recognized training and continuous education programs, specialized examination bodies, persons in charge of quality control system monitoring, among others; and (ix) investigation and discipline of auditors and audit firms, among other functions.

Professional organizations are involved in: (i) the certification and continuing professional education of their members; (ii) administering qualification exams when recognized as specialized examination bodies; and (iii) investigating and disciplining their individual members, except for audit firms, in accordance with the procedures developed in agreement with SARAS.

Professional organizations of accountants or/and auditors must be established according to the Georgian legislation, be registered as a non-entrepreneurial (non-profit) legal entity, and act in compliance with applicable laws and regulations. They are also required to establish internal policies, systems, and procedures for meeting SARAS requirements for professional certification and continuous education and ensuring compliance of its members with the Code of Ethics of the International Ethics Standards Board of Accountants' (IESBA), as well as the requirements for the quality control. Professional organizations must also have a register of member auditors and certified accountants, rules for disciplinary actions and identification for infringement of the law by member auditors. They are obliged to publish the annual financial statements and the statement of performance. Further, the majority of members of the governing body of the professional organization must be auditors and/or certified accountants.

The Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 established the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance as the authority responsible for audit oversight.

The responsibilities of the SARAS include: (i) promulgation of international standards, including their translation into Georgian, such as IFRS, IFRS for SMEs, ISA, and IESBA Code of Ethics; (ii) defining rules and requirements for auditing; (iii) defining rules for audit quality control system and its monitoring; (iv) monitoring quality control systems of auditors and audit firms registered in the auditors’ registry; (v) defining requirements for professional certification, examination procedures and continuous education in accordance with IES, EU Directives and approving respective standards; (vi) setting rules for recognition of certification programs, examination procedures and continuous education programs and their recognition; (vii) overseeing professional organizations, examination bodies and other persons engaged in professional educational activities with the law; (viii) maintaining the registry of auditors and audit firms, recognized training and continuous education programs, specialized examination bodies; and (ix) investigation and discipline of auditors and audit firms, among other functions.

The SARAS is a member of the International Forum of Independent Audit Regulators.

The Georgian Federation of Auditors, Accountants and Financial Managers (GFAAFM)

The GFAAFM, established in 2011, unites small and medium audit practices, bookkeepers, accountants, and tax advisors, who join the organization on a voluntary basis.

The GFAAFM delivers trainings in various areas including tax, internal audit, and financial management.

The Georgian Federation of Professional Accountants and Auditors (GFPAA)

The GFPAA is a non-governmental, non-for-profit PAO in Georgia. Prior to 2016, it was the only accredited professional organization authorized to regulate auditors. The GFPAA membership is mostly comprised of audit firms, auditors employed by audit firms, sole practitioners, and consultants. The GFPAA offers a certification program under the local accountancy qualification, based on the UK Association of Chartered Certified Accountants (ACCA) qualification curricula translated into the Georgian language. The GFPAA has been an IFAC member since 2000.

The Government of Georgia signed an Association Agreement with the European Union (EU) in June 2014. Accordingly, Georgian legislation is now being brought in line with the EU acquis communautaire and the EU Directives and Regulations in accounting and auditing.

In 2015, the World Bank published the results of its assessment of the accounting and auditing environment in the Republic of Georgia. Although the Government of Georgia was overall commended for its commitment to improving the corporate financial reporting framework, it was noted that the focus now should be on developing the capacity to fully implement and enforce the changed structural framework, and raising the professional level and capacity of accountants, auditors, and regulators. As far as the accountancy profession is concerned, the World Bank pointed out to the need to: (i) strengthen accounting academic curricula in line with IES and align university programs with professional educational programs; (ii) enhance continuing professional education and training to bring it in line with IES; (iii) work to enhance professional knowledge of the accountancy professionals regarding international standards; (iv) improve professional development training for professional auditors and develop an ISA compliant standard audit methodology; and (v) introduce a system of public oversight of the audit profession, among other recommendations.

In 2016, in line with the recommendations of the World Bank and in a move to align the corporate financial reporting requirements in the jurisdiction with those of the EU, a Law on Accounting, Auditing and Reporting No. 5386 of June 8, 2016 was adopted. The law established the Service for Accounting, Reporting and Auditing Supervision (SARAS) with the authority to regulate the auditing profession, the responsibility previously carried out by the accredited professional organizations.

These efforts have been supported by the World Bank through its Vienna-based Centre for Financial Reporting Reforms (CFRR) under the Public Sector Accounting and Reporting Program (PULSAR) Program and the Strengthening Auditing and Reporting in Countries of the Eastern Partnership (STAREP). The GFPAA is an active participant and beneficiary of both Programs.

The Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 requires the establishment of quality control policies and procedures in accordance with the International Standards on Quality Control adopted and translated by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance within six months from the day of its issuance. In May 2022, the SARAS issued a statement adopting quality management standards (ISQM 1 and 2) with the effective date of December 15, 2022.

SARAS is responsible for the establishment and implementation of a quality assurance (QA) review system, approving quality reviewers, performing quality reviews of audit firms and maintaining the auditors register. Reviews are conducted every three years for public-interest entities and every six years for other types of companies.

According to the assessment conducted by the Georgian Federation of Professional Accountants and Auditors, an IFAC member in the jurisdiction, the system complies with the requirements of SMO 1, apart from the QA team’s expertise.

Current Status: Partially Adopted

The Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 restricts the exercise of the profession to individuals and entities that meet initial and continuing professional development (IPD & CPD) requirements established by the law and further detailed by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance. Under the Law, IPD & CPD requirements must be in line with IES as well as the EU requirements. 2015 IES were translated into Georgian in 2018.

The law recognizes the qualification of a Certified Accountant, who is defined as an individual certified by a professional organization in accordance with the Professional Certification Standard set by SARAS or is recognized as such under the Law No. No. 5386, and who can prove their qualification after certification in accordance with the Continuous Education Standard.

Universities, specialized examination bodies, and professional organizations implement the requirements set in law. Professional organizations, recognized as such by SARAS, are responsible for administering the certification, continuing professional education of their members, and qualification exams when accredited as specialized examination bodies by SARAS.

According to the SARAS website, SARAS recognized certification programs of two professional organizations: the Georgian Federation of Professional Accountants and Auditors (GFPAA), and the Georgian Federation of Auditors, Accountants and Financial Managers (GFAAFM). Only GFPAA—an IFAC member—is authorized to conduct examinations, and GFPAA and GFAAFM are approved to offer the certificate programs and conduct CPD.

GFAAFM is not a member organization of IFAC and therefore has not reported on its programs’ alignment with IES.

The GFPAA’s certification program (addressing IES 2 – 6) is based on the Association of Chartered Certified Accountants (ACCA) qualification curricula translated into the Georgian language and was last reviewed in 2022. In its SMO Action Plan, the GFPAA outlines in detail how its certification program meets the related IES requirements.

GFPAA also indicates that its CPD requirements fulfill IES 7 and 8 requirements and must align with the national Continuous Education Standard.

Although substantial progress has been made in bringing accountancy education in the country in line with the international standards by legally mandating compliance of educational programming with the IESs, according to the CFRR / World Bank publication National Education Initiatives – Georgia (2019), there are improvements that can be made to the educational requirements to better align with the latest, competency-based IES requirements. For universities (IES 1), the areas of Management Accounting Techniques, Management and Ethics, Financial Accounting Concepts, and Preparation of Financial Statements need strengthening as well as developing training in professional values, ethics, and attitudes. Monitoring and assessment of competencies developed during practical experience (IES 5) also could benefit from improvements.

The GFPAA reports that accounting academic programs of universities are in line with IES at the fundamental level, with the stated goal of achieving full compliance of all levels with IES.

Current Status: Partially Adopted

In accordance with the Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016, all audits must be carried out in accordance with ISA as issued by the IAASB and translated by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance within 6 months from their issuance. Application of the English version of ISA is permitted.

To date, the SARAS has translated and adopted the 2020 IAASB Handbook, in addition to ISA 315 (revised; effective December 2021) and International Standards for Quality Management (effective December 2022).

Other pronouncements issued by the IAASB such as International Standards on Review Engagements (ISRE), International Standards on Assurance Engagements (ISAE), International Standards on Related Services (ISRS), and International Standards on Quality Management (ISQM) are also translated and adopted by the SARAS.

Current Status: Adopted

The Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016 requires all certified accountants, the only segment of the profession regulated at the state level, to abide by the Code of Ethics for Professional Accountants issued by the IESBA. In addition, professional organizations of accountants or/and auditors must ensure compliance of all their members with the Code.

The responsibility for translating the IESBA Code under the law is vested with the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance, which is responsible for ensuring its availability in the official language of Georgia within six months following any update. Application of the English version of the IESBA Code is permitted.

The 2022 version of the International Code of Ethics for Professional Accountants in Georgian language has been translated and adopted.

Current Status: Adopted

The Ministry of Finance and the Treasury are responsible for adopting public sector accounting standards in the Republic of Georgia. According to the World Bank/CFRR’s Book on Public Sector Accounting Reforms Implementation Status in PULSAR Countries (2022), public sector accounting and reporting regulations were approved in 2020, which cover 24 accrual basis IPSAS chosen based on their relevance to the Georgian public sector. These standards were introduced in 2021 for government entities. To date, the accounting and reporting framework for central government entities is conducted on a full accrual basis while local government entities are using partial accrual. There are ongoing reforms, supported by international development partners, to achieve full implementation of accrual-basis IPSAS.

Current Status: Partially Adopted

Under the Law on Accounting, Auditing and Reporting No. 5386 adopted in June 2016, the responsibility for the investigation and discipline of professional accountants is shared between the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance and professional organizations.

SARAS bears the responsibility for the development of an overall investigative and disciplinary (I&D) system for certified accountants, the only segment of the profession regulated at the state level. Certified accountants must be members of one of the recognized professional organizations, which are responsible for detecting violations and imposition of disciplinary actions on their members and setting the respective rules and regulations that are approved by SARAS. The SARAS can also issue a range of sanctions.

The Georgian Federation of Professional Accountants and Auditors, an IFAC member, has established an Ethics & Disciplinary Committee to fulfill this obligation. In 2022, it assessed the I&D procedures against the requirements of SMO 6 and indicated that the procedures meet those requirements.

The Georgian Federation of Auditors, Accountants and Financial Managers (GFAAFM), a professional accountancy organization authorized by SARAS to carry out a certificate program & CPD, also has a Professional Ethics & Disciplinary Committee and rules to detect violations. The GFAAFM is not an IFAC member organizations and therefore has not reported on its enforcement mechanisms and alignment with the SMO 6 best practices.

Current Status: Partially Adopted

The Law on Accounting, Auditing and Reporting No. 5386 of 2016 differentiates between four categories of reporting entities in Georgia based on their size (total assets, revenues, and number of employees) and also defines public-interest entities (PIEs), which include listed entities, banks, micro-finance institutions, credit unions, investment funds, insurance companies, among other types of entities.

PIEs and large enterprises (first category) are required to apply IFRS as issued by the IASB and translated by the Service for Accounting, Reporting and Auditing Supervision (SARAS) under the Ministry of Finance within 6 months from their issuance. Application of the English version of IFRS is permitted. Small and Medium-sized entities (second and the third categories) may apply either IFRS for SMEs or full IFRS. Micro entities (fourth category) and non-entrepreneurial (non-profit) legal entities are permitted to apply IFRS, IFRS for SMEs or the standard set by the SARAS.

The 2023 IFRS and 2015 IFRS for SMEs as translated into Georgian are available for application.

Current Status: Adopted

Relevant Organizations

• Georgian Federation of Professional Accountants and Auditors (GFPAA)
• Georgian Federation of Auditors, Accountants and Financial Managers (GFAAFM)
• Service for Accounting, Reporting and Auditing Supervision (SARAS)
• Insurance State Supervision Service of Georgia
• National Bank of Georgia (NBG)

Relevant Legislation

• Law on Accounting and Financial Audit, 2012
• Law on Accounting and Financial Audit, 2016
• SARAS Order On Approving Procedure for Recognition of Certification Programs and Examination Process, 2017
• SARAS Decree n-24, 2017
• Insurance Law, 2009
• Law on Entrepreneurs, 1994
• Tax Code

Relevant Publications

• GFPAA, SMO Action Plan, 2023.
• IFIAR, Member Profile: SARAS.
• IFRS Foundation, IFRS Application Around the World, Jurisdictional Profile: Georgia, Oct 2019.
• Revazishvili, Marina, “Compliance of Professional Education System with International Standards of Education of Professional Accountants”, PowerPoint presentation. Nov 2022.
• World Bank, Report on Observance of Standards and Codes, Accounting and Auditing: Georgia, March 2015.
• --, A benchmarking analysis and review of accountancy education in Georgia, 2020.
• World Bank / CFRR, Book on Public Sector Accounting Reforms Implementation Status in PULSAR Countries, 2022.
• -- Stocktaking of Public Sector Accounting and Reporting Environment in PULSAR Beneficiary Countries: Georgia, 2020.
• --, National Education Initiatives – Georgia (2019).
• Zhorzholiani, Rusudan, “Role of the GFPAA in Regulation of the Profession and in Development of Professional Accountants”, PowerPoint presentation. Nov 2018.