Key Takeaways:
- Enterprises and non-profit organizations that are not required to have their 2023 annual financial statements externally audited are obliged to submit their financial statements to ACAR by 20 April 2024.
- Enterprises and non-profit organisations that are required to have their 2023 financial statements externally audited are obliged to submit their financial statements to ACAR by 20 July 2024.
- All enterprises and organizations must obtain a Certificate of Financial Reporting Identification Number for Enterprise (FIN) to submit their annual financial statements to ACAR using the online system (e-filing system).
- Enterprises and organisations that have unaudited financial statements for the 2021 and 2022 financial year end and have not yet submitted them to ACAR have until the end of February 2024 to do so.
- Enterprises and non-profit organisations that had received transitional penalties from ACAR and who had not yet made payment may submit a protest letter to ACAR and attaching evidence to verify that it has already fulfilled its obligations no later than 15 February, 2024.
- Enterprises or organizations that use a third party accounting or audit firm must choose one of accounting firms or audit firms that has a license that is still valid from ACAR as set out in the latest list issued by ACAR.
Background
The Accounting and Auditing Regulator of Cambodia (ACAR) has upgraded its public profile in recent times from relative obscurity to that of being well in the public spotlight. This is in part due to its recent enthusiastic and somewhat liberal application to the large array of penalties at its disposal with respect to entities that fall foul of its compliance requirements.
So what and who is ACAR and why do businesses in Cambodia need to take heed of the ever growing presence of this regulatory body in the business landscape?
ACAR as its name suggests is the Government regulatory body that oversees the accounting and auditing profession in Cambodia. It is responsible for the licensing of accounting and auditing firms in Cambodia and the introduction and implementation of regulations and standards pertaining to audit and accounting matters.
To be able to provide accounting and auditing services in Cambodia, firms are required to not only be a member of the Kampuchea Institute of Certified Public Accountants and Auditors (KICPAA) they must also obtain a valid and current license from ACAR.
To put it another way if your current accounting and/or audit advisor does not meet the above requirements then they are operating in violation of the accounting and auditing regulations in Cambodia. Please refer to the link here for the latest list of licensed accounting and auditing firms in Cambodia.
Headed up by His Excellency Bou Tharin, ACAR has a number of internal departments including General Affairs, Technical, Professional Management – Accounting and Auditing and Legal Affairs and Compliance. The primary source of law enforced by ACAR is the Law on Acounting and Auditing. In addition to the Law there are a number of secondary implementing Sub-decrees, Prakas and Notifications.
Why has ACAR attracted so much recent attention in the Cambodian business sector in recent times?
On the 27th of January 2022 ACAR issued Instruction 002 which expanded the obligation to submit financial statements to ACAR not just to those enterprises that are required to obtain externally audited financial statements but also to all enterprises regardless of whether their financial statements were required to be externally audited or not. For those enterprises with unaudited financial statements the ACAR submission date was initially (3) three months and (15) fifteen days following the close of the financial year. This obligation started from the 2021 financial year onward.
Not only did Instruction 002 oblige all enterprises and organisations to submit their unaudited financial statements to ACAR there was a accompanying online registration requirement and a requirement for the submitted financial statements to follow the standard templates provided by ACAR.
Cambodia has adopted the International Financial Reporting Standards (IFRS) without any amendments as the Cambodian International Financial Reporting Standards (CIFRS) and IFRS for Small-and Medium-sized Entities (SMEs) was also adopted and referred to as the Cambodian International Financial Reporting Standards for SMEs (CIFRS for SMEs).
Whilst it is clear that the accounting regulations in Cambodia require all enterprises and organisations to maintain proper financial statements i.e; accounting ledgers and journals, statement of accounts, payment vouchers, profit and loss statements, balance sheets etc, it is fair to say that a number of enterprises and organisations in Cambodia were caught unaware by this requirement.
In its first year of implementation ACAR delayed the due date for the submission of unaudited financial statements on a number of occasions but the uptake of filed submissions was not high.
There is nothing like a monetary incentive to get people to act.
In 2023 businesses and non-profit organisations in Cambodia started receiving letters from ACAR informing them of their non-compliant status with respect to the submission of their annual unaudited financial statements for the 2021 financial year. In addition to the reminder was a request to pay penalties which in a number of cases were in the thousands of dollars. Under Sub-Decree No.79 ANKr.BK dated 1 June 2020, ACAR can draw on a number of offenses to which it can apply penalties ranging from Khmer Riel 800,000 to KHR10,000,000. These initial penalties can be doubled or tripled if not paid on time.
This is when things got interesting…
Receiving letters of non-compliance with large penalties was not particualry well received by the Cambodian business community and the anticipated push back culminated in the speech of the new Cambodian Prime Minister His Excellency Dr. Hun Manet the Prime Minister of the Kingdom of Cambodia during his speech at the 19th Government-Private Sector Forum on 13 November 2023. The main takeaways of His Excellency’s speech on this issue were as follows:
Understanding the challenges of all enterprises in fulfilling their accounting and auditing obligations, the Royal Government has decided to introduce the following measures:
(1) Provide exemptions to enterprises not subject to independent audits that have not yet submitted their financial statements to the Accounting and Auditing Regulator until the end of February 2024;
(2) ACAR must be flexible in implementing the transitional penalties and explore ways to settle the private sector’s complaints or objections;
(3) Amend the Sub-Decree on transitional penalties for violations of the Law on Accounting and Auditing and the ministry order (Prakas) on the obligations to subject financial statements to an independent audit;
(4) Promote the dissemination of relevant laws and regulations and technical training on accounting standards to representatives and accountants of enterprises, general public and relevant public officials;
(5) Promote the preparation of glossary of accounting and auditing terms and the translation of accounting and auditing standards into Khmer, and
(6) Explore the possibility of developing Cambodian simplified accounting standards for small and medium taxpayer enterprises (Cambodian Simplified Accounting Standards) for a transitional period before moving towards implementing the international accounting standards.
The points made in the Prime Ministers speech corresponded with those of ACAR in No.033/23 AAR.N dated 7 November 2023. One of the key updates in No.033/23 AAR.N was that:
“Enterprises and non-profit organisations that had received transitional penalty letters from ACAR and who had not yet make payment before the date of issuance of this notification, may submit a protest letter to ACAR and attach a document with valid evidence to verify that it has already fulfilled its obligations no later than 31 December* 2023”
The deadline of 31 December 2023 was extended to 15 February 2024 under the Notification No.004/24 AAR.N issued on the 23rd of January 2024.
So where do things stand now?
On the 27th of December 2023 ACAR issued Notification 038/23 AAR (Notification 038) regarding the obligation to submit annual financial statements for the 2023 financial year which contained the following key points:
- For those enterprises and non-profit organizations with a 31 December financial year-end that are not required to have their 2023 annual financial statements externally audited the due date for submission with ACAR is 20 April 2024. Those enterprises and non-profit organizations that have a non-standard financial year must submit their unaudited financial statements no later than 3 months and 20 days from the date of the financial year-end.
- For those enterprises and non-profit organisations with a 31 December year-end that are required to have their 2023 financial statements externally audited the due date for submission with ACAR is 20 July 2024. Enterprises and organizations that have a non-standard financial year-end must submit their annual financial statements to ACAR no later than 6 months and 20 days from the date of the financial year-end.
In addition Notification 038 outlined the core obligations that enterprises and organisations must follow to avoid receiving interim penalties for violating the Law on Accounting and Auditing. These include:
1. Maintaining accurate accounting records.
2. Preparing financial statements in accordance with the applicable accounting standards within three (3) months from the close of the financial year (Accounting Standards refer to the Cambodia International Financial Reporting Standards (CIFRS) or the Cambodia International Financial Reporting Standards for Small and Medium Sized Entities (CIFRS for SMEs) or Cambodian Financial Reporting Standards for Not-For-Profit Entities (CFRS for NFPEs)).
3. For those enterprises that require external audits these must be completed no later than 6 months from the date of the financial year-end.
4. All enterprises and organizations must have a Certificate of Financial Reporting Identification Number for Enterprise (FIN) to submit their annual financial statements to ACAR using the online system (e-filing system).
Enterprises or organizations that do not have a Financial Reporting Identification Number (FIN Number) from ACAR yet, must request one online (https://efiling.acar.gov.kh/auth/login) by following the procedures and instructions for using the online system.
5. Enterprises or organizations must pay the prescribed government fee with respect to the maintenance of financial statement as set out in Prakas No. 001 MEF dated 12th January, 2022 on the public service fee from the Accounting and Auditing Regulators (ACAR).
- Enterprises that have an obligation to submit audited financial statements -KHR 300,000
- Enterprises that do not have an obligation to submit audited financial statements – KHR 200,000
- NGOs that have an obligation to submit financial statements – KHR 100,000
- NGOs that do not have an obligation to submit financial statements – KHR 60,000
6. Enterprises or organizations can assign a representative to perform accounting and auditing duties with ACAR officers. The representative can be an employee of the enterprise or the organizations, or an accounting firm or an audit firm that has a valid and current license from ACAR.
7. Enterprises or organizations must choose one of accounting firms or audit firms that has a professional accounting and auditing license that is still valid from ACAR.
Accounting services required to be undertaken by a licensed accounting firm in Cambodia are provided by Mekong Accounting Services Co., Ltd, a member of DFDL and licensed for the practice of type 2 accounting services, in accordance with the standards set forth by ACAR.
Tax services required to be undertaken by a licensed tax agent in Cambodia are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian tax agent under license number – TA201701018.
