LIETUVOS RESPUBLIKOS

LIETUVOS RESPUBLIKOS OFFICIAL TRANSLATION Republic of Lithuania LAW ON CONSOLIDATED ACCOUNTS OF ENTITIES 6 November 2001 No IX-576 (As last amended on 18 December 2003, No. IX-1916) Vilnius CHAPTER I GENERAL PROVISIONS Article

1. Purpose of the Law
2. This Law shall regulate the drawing up, approval and publishing of consolidated accounts, carrying out of audit and set requirements for the entities which are under an obligation to draw up consolidated accounts.
3. This Law has the objective of harmonising the procedure for drawing up, approving and publishing consolidated accounts and the regulation of carrying out of audit and requirements for the entities which are under an obligation to draw up consolidated accounts with the EU legal acts listed in the Annex to this Law. Article
4. Application of the Law
5. This Law shall be applied to public limited liability companies and private limited liability companies (hereinafter referred to as “entities”).
6. This Law shall be applied to banks and other credit institutions to the extent it does not contradict the laws regulating activities thereof. Article
7. Definitions
8. “Associated undertaking” shall mean an entity over which another entity (investor) exercises a significant influence and which is neither a subsidiary undertaking of that entity nor an entity operating on the basis of a joint activities (partnership) agreement.
9. “Net assets” shall mean a part of an entity’s total assets appreciated at their fair value less all liabilities appreciated at their fair value.
10. “Group of undertakings” shall mean a parent undertaking and subsidiary undertakings thereof.
11. “Consolidation” shall mean the pooling together of accounts of a group of undertakings into a single set of financial statements by applying the methods of Business Accounting Standards.
12. “Consolidated accounts” shall mean the financial statements of a group of undertakings drawn up as the financial statements of a single entity.
13. “Control” shall mean the right of an entity to exercise a dominant influence over another entity, to manage and influence the financial and economic activities of another entity for the purpose of deriving benefit there from. Control may be direct and indirect.
14. “Minority holding” shall mean a proportion of the equity capital of a subsidiary undertaking or a proportion of the net profit (loss) for the reporting period belonging to the shareholders of the subsidiary undertaking who are shareholders neither of a parent undertaking nor of other subsidiary undertaking belonging to the group of undertakings.
15. “Indirect control” shall mean the control arising through other controlled entities or through the entities controlled by the controlled entities.
16. “Equity method” shall mean a method of accounting whereby the investment in shares is recorded at acquisition cost at the time of acquisition thereof and the value thereof is increased (decreased) thereafter for the post acquisition change in the investor's share of net assets of the investee. The investor’s profit (loss) account shall reflect the investor’s share of the net profit (loss) of the investee.
17. “Significant influence” shall mean a possibility to participate in financial and economic policy making processes without controlling an entity. In any case, influence shall be considered significant when an entity holds another entity’s shares granting at least 20 per cent of votes at the general meeting of shareholders.
18. “Direct control” shall be subject to at least one of the following conditions: 1) an entity holds another entity’s shares granting more than one half of the votes; 2) an entity holding another entity’s shares granting less than one half of the votes shall have the right to elect or remove the head of the administration of the other entity and the majority of the members of the board or supervisory board; 3) an entity holding another entity’s shares granting less than one half of the votes may, on the basis of agreements with other shareholders of the other entity, decide on the use of more than one half of the votes granted by the shares of the latter entity.
19. “Fair value” shall mean the amount at which assets may be exchanged or at which a mutual liability of unrelated parties willing to purchase (sell) assets or to settle the mutual liability may be settled.
20. Other concepts used in this Law shall be interpreted as they are defined in the Republic of Lithuania Law on Accounting. Article
21. Conditions for the Drawing up of Consolidated Accounts
22. An entity having one or several subsidiary undertakings must draw up consolidated accounts.
23. The accounts of a parent undertaking and all subsidiary undertakings thereof must be consolidated regardless of where the registered offices of the subsidiary undertakings are situated.
24. An entity which is a subsidiary undertaking of a subsidiary undertaking of a group of undertakings shall be considered a subsidiary undertaking of a parent undertaking of the group of undertakings, and accounts thereof must be consolidated. Article
25. Exceptions to the Requirement for a Parent Undertaking Being a Subsidiary Undertaking of Another Group of Undertakings Entities to Draw up Consolidated Accounts
26. A parent undertaking shall be exempted from the obligation to draw up consolidated accounts where it is a subsidiary undertaking of a group of undertakings the parent undertaking whereof is registered in the Republic of Lithuania and fulfils one of the following conditions: 1) all of the shares thereof are held by its parent undertaking; 2) 90 per cent or more of the shares thereof are held by the parent undertaking, and the remaining shareholders do not object to the drawing up of consolidated accounts.
27. An entity fulfilling one of the conditions referred to in paragraph 1 of this Article shall be exempted from the obligation to draw up consolidated accounts only in the following cases: 1) the entity and subsidiary undertakings thereof are consolidated in the accounts of another group of undertakings, the parent undertaking whereof is governed by this Law; 2) the notes on the accounts thereof disclose the name, code and registered office of the parent undertaking drawing up the consolidated accounts referred to in subparagraph 1 of paragraph 2 of this Article, information about a decision on the exemption from the obligation to draw up the consolidated accounts and the reasons for the exemption.
28. Provisions of paragraphs 1 and 2 of this Article shall not be applied where the securities of a parent undertaking or of at least one of the subsidiary undertakings thereof are traded on regulated markets. In such a case, the parent undertaking must draw up consolidated accounts. Article
29. Exceptions to the Requirement to Include a Subsidiary Undertaking in Consolidated Accounts
30. A subsidiary undertaking need not be included in consolidated accounts provided at least one of the following conditions exists: 1) shares of the subsidiary undertaking have been acquired with a view to their subsequent resale and included in the account of current financial assets of the parent undertaking; 2) activities of the subsidiary undertaking are subject to severe long-term restrictions hindering it in the transfer of assets and funds to the parent undertaking as well as in the exercise of management; 3) the information necessary for the drawing up of consolidated accounts cannot be presented without disproportionate expense and undue delay.
31. A subsidiary undertaking need not be included in consolidated accounts where the entity is not material in respect of a group of undertakings. The subsidiary undertaking shall be considered not material in respect of the group of undertakings where assets thereof at the end of the financial year do not exceed 5 per cent of the assets of a parent undertaking, and the net turnover over the reporting year does not exceed 5 per cent of the net turnover of the parent undertaking over the same period. This provision shall not be applied where the same group of undertakings contains several such subsidiary undertakings and their exclusion from the consolidated accounts would infringe the principle of materiality as well as the requirement to give a fair view of the financial position of the group of undertakings and operating results thereof.
32. Where a subsidiary undertaking is not included in consolidated accounts under the conditions specified in paragraph 2 of this Article, the financial condition and operating results thereof must be disclosed in consolidated annual accounts using the equity method. CHAPTER II DRAWING UP OF CONSOLIDATED ACCOUNTS Article
33. Components of Consolidated Accounts
34. Consolidated accounts shall comprise: 1) consolidated balance sheet; 2) consolidated profit (loss) account; 3) consolidated cash flow statement; 4) consolidated statement of changes in equity; 5) notes on the accounts.
35. All financial statements listed in paragraph 1 of this Article shall constitute a composite whole. Article
36. Requirements for Consolidated Accounts
37. Consolidated accounts must be drawn up in order to give a true and fair view of a group of undertakings’ assets, liabilities, equity capital, financial condition and operating results, origin and amount of the capital and reserves according to data of the last day of the reporting period, cash flows as well as the substance and amount of the income and expenditure for the period.
38. Consolidated accounts shall be drawn up using the monetary unit of the Republic of Lithuania – the Litas.
39. Consolidated accounts shall be drawn up in compliance with the Law on Accounting, the Law on Financial Statements of Entities, this Law and the Business Accounting Standards. The consolidated accounts of the entities whose securities are traded on regulated markets shall be drawn up in conformity with International Accounting Standards.
40. Where provisions of the Business Accounting Standards are insufficient to meet the requirements set by paragraph 1 of Article 8 of this Law, entities shall submit additional information. Where in exceptional cases the consolidated accounts drawn up by applying the Business Accounting Standards are incompatible with the requirements set in paragraph 1 of this Article, the Business Accounting Standards may be departed from in order to meet the requirement of paragraph 1 of this Article to give a true and fair view of a group of undertakings’ financial condition, operating results and cash flows. Any such departure shall be disclosed in the notes on the accounts together with an explanation of the reasons for it and a statement of its effects on the group of undertakings’ assets, equity capital, liabilities, financial condition and operating results.
41. Consolidated accounts must disclose total assets, liabilities and equity capital of a group of undertakings at the balance sheet date as well as the income and expenditure relating to the reporting period for which the profit (loss) account is drawn up.
42. When drawing up consolidated accounts, the accounts of a parent undertaking and subsidiary undertakings thereof for the same reporting period must be consolidated.
43. Where the reporting periods of a parent undertaking and subsidiary undertakings thereof are different, the reporting period selected by the largest entities of the group of undertakings for the drawing up of accounts shall be selected when drawing up consolidated accounts. In this case, other entities of the group of undertakings must draw up their accounts until the date of consolidation, and, where this is impossible, accounts for different periods may be consolidated, but these periods may not differ by more than three months.
44. Where provisions of paragraph 7 of this Article have been applied to the consolidation of accounts, this fact must be disclosed in the notes on the accounts. In addition, the notes on the accounts must disclose all important facts and economic events concerning an appropriate entity’s assets, equity capital and liabilities, financial condition, profit (loss) and operations with other entities included in consolidated accounts and occurred between that entity’s annual accounts date and the consolidated balance sheet date.
45. Where an entity has acquired the shares of another entity giving rise to a parent-subsidiary relationship, the parent undertaking must require that the subsidiary undertaking draws up its accounts according to the data of the day as close as possible to the date of the rise of such a relationship. This provision shall not be applied where not more than two months are left until or have lapsed since the drawing up of annual accounts of the subsidiary undertaking.
46. Where a parent-subsidiary relationship arises, the operating results of the subsidiary undertaking shall be included in consolidated accounts not as from the beginning of the financial year, but as from the day of the rise of the parent-subsidiary relationship.
47. Where a parent undertaking ceases to have control of a subsidiary undertaking, only the operating results of the subsidiary undertaking until the day of the loss of control shall be included in consolidated accounts. Where after the loss of control the former parent undertaking still holds a part of the shares of the former subsidiary undertaking, the shares of the former subsidiary undertaking still held by it shall be accounted for as the shares of an associated undertaking or as an investment in shares taking account of the number of the shares and intentions of the entity carrying out consolidation.
48. Where an entity which is not under an obligation to draw up accounts under this Law takes a decision of the drawing up of consolidated accounts at its own discretion, it must draw up the consolidated accounts in compliance with the requirements set by this Law.
49. A parent undertaking must exercise the right of control in order to ensure that upon its request, subsidiary undertakings timely submit the information necessary to meet the requirements set by this Law. Article
50. Financial Reports of Consolidated Accounts and Procedure for Preparing Them Sample financial reports of consolidated accounts and the procedure for preparing them shall be set forth by the Business Accounting Standards. CHAPTER III AUDIT, APPROVAL AND PUBLISHING OF CONSOLIDATED ACCOUNTS Article
51. Audit of Consolidated Accounts Audit of consolidated accounts must be carried out in the entities drawing up consolidated accounts. Article
52. Approval and Publishing of Consolidated Annual Accounts
53. Consolidated annual accounts shall be approved in accordance with the procedure set forth by the articles of association of an entity which has drawn them up.
54. Consolidated annual accounts shall be signed by the head of the administration of an entity which has drawn them up.
55. Consolidated annual accounts must be approved at the general meeting of shareholders of an entity which has drawn them up by simple majority of votes of the shareholders participating in the meeting not later than within 4 months of the day according to data whereof they have been drawn up.
56. The procedure for publishing approved consolidated annual accounts accompanied by an auditor’s report shall be the same as the procedure for publishing annual accounts.
57. The consolidated annual accounts published in full must be reproduced in the form and text on the basis of which an auditor has drawn up his report. Published consolidated annual accounts must be accompanied by the full text of the auditor’s report.
58. Where consolidated annual accounts are not published in full, it must be indicated that abridged consolidated annual accounts are published, and the location whereat access may be granted to full consolidated annual accounts must be indicated. In such a case, an auditor’s report may not published, but the auditor’s statement of an opinion presented in the auditor’s report must accompany this publication.
59. The head of the administration of an entity which has drawn up consolidated annual accounts shall be held liable under law for the failure to comply with the procedure for publishing them as set forth by this Law. CHAPTER IV FINAL PROVISIONS Article
60. Entry into Force of the Law
61. The Law shall enter into force on 1 January 2004, with the exception of provisions of paragraph 3 of Article 8 on the application of International Accounting Standards, which shall enter into force on 1 January
63. Consolidated accounts for 2004 and subsequent years shall be drawn up according to this Law. Article
64. Conditions for the Deferral of the Drawing up of Consolidated Accounts of Entities
65. A parent undertaking shall be exempted, until 1 January 2005, from the obligation to draw up consolidated accounts where the indicators of its group of undertakings do not exceed at least two of the following limits: 1) net turnover (without deducting intra-group sales) – LTL 5 000 000; 2) the total value of assets specified in the balance sheet (without deducting intra-group transactions) – LTL 2 500 000; 3) average number of pay-roll workers during the year –
67. Provisions of paragraph 1 of this Article shall not be applied where securities of a parent undertaking or of at least one of subsidiary undertakings thereof are traded on regulated markets. I promulgate this Law passed by the Seimas of the Republic of Lithuania. PRESIDENT OF THE REPUBLIC VALDAS ADAMKUS Annex to 6 November 2001 Republic of Lithuania Law No. IX-576 EU LEGAL ACTS IMPLEMENTED HEREBY
68. Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54