Legislation change in Russia: Usage limitations of cloud versions of Microsoft Dynamics 365 in regards of new Accounting Standard FSBU 27/2021

There are few upcoming legislation changes for Russian accounting, related to accounting transactions storage. That should have had its impact starting from 1st of January, 2022. Many users have questions how to interpret and apply new upcoming legislation, and would it still be possible to use cloud versions of (any) ERP solutions that are hosted outside of the territory of Russia. Here is an explanation on that matter:

The law “Accounting Standard FSBU 27/2021” states that accounting transactions "should be kept in the database on the territory of Russia".

There has been nothing but this statement in the upcoming law, therefore certain clarifying questions have been directed to the governmental bodies. Currently, lawyers who analyze this legal statement take the following points into account:

• This new law does not anyhow restrict or limit the creation/input/processing of accounting data outside of the territory of Russia
• This law does not anyhow requires to have the accounting data initially created in the databases on the territory of Russia (as it is indicated e.g. for Personal Data)
• There is no any indication to use any specific (accounting) system
• There is no any limitation to use several accounting systems
• The nature of accounting itself assumes there is no “real-time” accounting transactions taking place – accounting itself by nature is a reactive thing and usually it takes some time to record a transaction in the database. Moreover, real-time accounting is not even possible. Example: physical equipment is being depreciated every day, however there is no requirement to post depreciation the same every day; we post it, as most convenient, in the end of every month for the whole month. The same is not mentioned anyhow in this new law, and in reality it can take few months before the accounting transaction is created (as we have quarterly reporting, e.g. some January transactions can be actually recorded even in April for preparation of 1st quarter report)
• When an economic entity creates primary accounting documents, it is allowed to:
  • Draw up several related facts of economic life with one primary document
  • Formalize long-lasting facts of economic activity (for example, interest calculations, depreciation of assets, changes in the value of assets and liabilities), as well as recurring facts of economic activity (for example, the supply of goods or products in batches on different dates under one long-term contract) by primary accounting documents drawn up at intervals (day, week, month, quarter) determined by the economic entity based on the essence of the fact of economic activity and requirements rationality, assuming their compulsory compilation at the reporting date

Having all that in mind, all experts so far consider that it would be enough to keep the backup copy of the database, deployed on-premises or in local Russian data center, to follow the requirements of that law. Moreover, this database copy does not need to be real-time or close to real-time. Therefore, there are already few out-of-the-box solutions to follow that law:

• Periodic backup copy to local servers
• Use of Cloud Migration Tool (ex. Intelligent Edge)
• Native integration with Azure Data Lake, announced recently, and other options.

Experts come to conclusion that Microsoft as vendor offers customers all the tools, required to build up such IT landscape in order to follow that legislation change.

Summing up, we are positive to think there will be minor changes to existing ERP/CRM solutions already available (e.g., D365F&SCM is available in SAAS cloud in Russia), still looking forward to have D365BC in the same conditions soon.

Last, but not least: the paragraph 25 of this new law has been initiated for postponing till 1st of January 2024 (https://www.garant.ru/news/1505554/ ), with Accounting Standard Council approved this postponing on December 07, 2021 (https://minfin.gov.ru/ru/document/?id_4=134976-informatsionnoe_soobshchenie_o_zasedanii_soveta_po_standartam_bukhgalterskogo_ucheta)

I'm always happy to get contacted with questions regarding latest updates on #MSDyn365 Russian localization and legislation.