Overview of Accounting and Auditing in Liberia

Liberia is situated in West Africa. It is bordered by Sierra Leone, Guinea, and Côte d’lvoire. It is strategically located and has access to the regional markets and trade routes. Liberia has made improvements in its business climate. It has simplified the regulations and streamlined the process of commencing a business. Attractive policies for foreign investment have been implemented. These attractive policies include investment guarantees, tax incentives, and the creation of a “one-stop shop” for investors. For a better understanding of Accounting and auditing services in Liberia, we have discussed it in detail below.

Accounting Requirements

In Liberia, the financial reporting requirements are regulated by the Financial Reporting Act of 2011 and Liberian Associations Laws. Financial statements in Liberia are prepared as per the International Financial Reporting Standards (IFRS) or as per the Generally Accepted Accounting Principals (GAAP) for small and medium-sized companies. The Balance Sheet, Profit and Loss Statement, cash flow statement, and notes to financial statements are a part of financial statements. It is the Liberia Institute of Certified Public Accountants (LICPA) who are responsible for establishing and ensuring compliance with GAAP. GAAP of Liberia is majorly based on the IFRS with some differences majorly related to taxation and public accounting. Apart from reporting standards, companies in Liberia have to comply with accounting requirements and regulations of the Securities and Exchange Commission of Liberia (SEC), the standards of the Liberian Extractive Industries Transparency Initiative (LEITI) which is a regulation of the Central Bank of Liberia (CBL). The financial statements of the companies in Liberia must be in English as it is the official language of Liberia unless it is otherwise permitted by the Corporate Registry. All accounting statements such as the annual financial statement, interim financial statement, and any other statements prepared as per the Liberia legislation or regulations should be in English. The financial statements should be prepared in the official currency of Liberia i.e., the Liberian dollar (LRD) unless the LICPA allows them to use any other accounting currency. Those companies which are preparing their financial statements in a currency other than LRD then it must also state the amounts in LRD. This is done so that the reported financial information is understandable and comparable to local concerned parties and investors.

• Time limit for the preparation and submission of financial statements

The records of financial transactions, accounting records, and other accompanying necessary papers must be stored for at least 5 years. These records include bank statements, receipts, invoices, contracts, and other supporting necessary papers. Financial statements are required to be filed once every year before the Liberia Revenue Authority (LRA) and the Financial Reporting Council of Liberia (FRCL). The financial statements should be filed with LRA before the expiry of 6 months from the end of the financial year and with the FRCL before the expiry of 9 months from the end of the financial year. The financial year in Liberia is from 1^st July to 30^th June of the following calendar year. Apart from filing the financial statements, tax returns shall be filed with the LRA and taxes should be paid monthly. A tax return should contain information about the income, expenses, and tax obligations of the company for the reporting period. A tax return should be filed on or before the expiry of the 15^th day of the month succeeding.

• Late filing of accounts

Legal entities established as per the law of Liberia or authorized to conduct business in Liberia have the obligation to keep and store accounting records and accompanying necessary papers for 5 years. Failure to do so attracts a penalty of USD 3000 to USD 5000. Other possible consequences can be termination of the legal status of good standing of the company, cancellation of the license to conduct business, or even dissolution of the company. Penalty for late filing of financial statements may vary depending upon the type of the company, the duration of delay, and the specific circumstances of non-compliance.

As per the LRA, a penalty of 10% of the amount of tax due is imposed along with additional interest on outstanding tax on companies that fail to file tax returns or financial statements timely. Higher penalties may be imposed depending upon the duration of the delay and the additional penalties charged for each subsequent month of delay.

Auditing Requirements

In Liberia, the financial statements must be audited by a licensed registered auditor or audit firm. The auditor’s report must express his opinion on the reliability of the financial statement and compliance with the relevant accounting standards. The following is required to be audited:

1. Companies whose income, assets, or number of employees exceed a certain threshold. Example: a company whose annual turnover exceeds USD 250,000 or whose assets exceed over USD 250,000.
2. Companies having complex ownership structures or having their shares listed on an exchange.
3. Companies operating in certain industries such as banking, insurance, or securities markets.

Consolidated Financial Statements

Requirements of consolidated financial statements in Liberia include:

1. Consolidated financial statements include financial information about the parent company along with its subsidiaries, associated entities and joint ventures. It is represented as if they are a single business entity.
2. All subsidiaries, associated companies, and joint ventures having significant control or influence must file consolidated financial statements.
3. Unified accounting policies and procedures must be used to prepare the financial statements. Any significant transaction or balances within the company must be excluded to avoid double counting.
4. Exhaustive set of notes and disclosures must be filed along with financial statements to give further information on the financial position, cash flow, and result of the activity.
5. The consolidated financial statements should be audited by a licensed auditor in Liberia.

Who should file the consolidated financial statement?

The companies that shall file consolidated financial statements are:

1. Company that manages several subsidiaries, associated companies or joint ventures on whom the parent company has control or influence;
2. Companies listed on a stock exchange or subject to securities regulations
3. Companies with complex ownership structures or significant transactions with related parties.
4. Companies subjected to certain industry standards or regulations.
5. Companies that are part of a group or conglomerate with centralized management of finance and control.