How to Run a Year-End Inventory Count Before Annual Reporting for 2026

Every Ukrainian legal entity, as well as branches and representative offices of foreign legal entities, must carry out a year-end inventory (a count and verification of all assets and liabilities) before preparing its annual financial statements. For the 2026 statements, fixed assets, goods, materials, receivables and payables generally cannot be checked before October 1. Cash, financial investments, work in progress and tax balances cannot be checked before November 1. Assets that cannot be safely reached because of hostilities or occupation are inventoried under a separate rule.

The procedure is set by the Regulation on the Inventory of Assets and Liabilities, approved by Ministry of Finance of Ukraine Order No. 879 of September 2, 2014. As of October 2026, the year-end procedure is the same as last year. The current version of the Regulation dates from December 23, 2025, but that amendment only reworded its scope: instead of “representative offices of foreign business entities,” it now refers to branches and representative offices of foreign legal entities. The special paragraph on assets in occupied territory was added at the end of 2014, and Ministry of Finance Order No. 148 of May 26, 2022, extended it to combat areas under martial law.

When to carry out the year-end inventory

Before annual reporting, a full inventory is required. It covers all assets and liabilities wherever they are, including property that is leased out, under repair or mothballed, and third-party assets carried on off-balance-sheet accounts (paragraph 6 of section I). Deadlines are counted back from the balance sheet date, and for certain groups the Regulation sets a separate frequency (paragraph 10 of section I).

What is checked	When, for a balance sheet date of December 31, 2026
Non-current assets (except capital investments in progress), stock (inventories, except work in progress and semi-finished goods), current biological assets, receivables and payables, deferred expenses and deferred income, other liabilities	Within three months before the balance sheet date, i.e., from October 1
Capital investments in progress, work in progress, semi-finished goods, financial investments, cash, earmarked funding, unused provisions, tax and social insurance balances	Within two months, i.e., from November 1
Cars, vessels and other assets that will be away from the company on the count date	Before they temporarily leave the company
Land plots, buildings, structures and other real estate	Once every three years is allowed, except for other state property and real estate owned by state enterprises, institutions and organizations
Tools, instruments, fixtures (furniture)	By management decision, at least 30% each year, with all of them covered within three years

The start of the window is fixed. If goods, materials or equipment were counted in September, that count does not replace the year-end inventory, because their three-month window only opens on October 1. The end of the window is a practical matter: aim to finish counting by mid-December so the accounting team has time to prepare the reconciliation statements and record the results before the year-end close. The head of the company approves the inventory commission’s minutes within five working days after the inventory is completed. On the basis of the approved minutes, the results are recorded in the reporting period in which the inventory was completed (paragraphs 2 and 3 of section IV).

If the financial statements are audited

If the company’s financial statements are subject to an audit, agree on the stock count date with the auditor well in advance, ideally before the internal order is issued. Under International Standard on Auditing (ISA) 501, when stock is material to the financial statements, the auditor attends the physical count unless this is impracticable. The auditor evaluates management’s instructions, observes the count, inspects the stock and performs test counts. If the count takes place on a date other than the balance sheet date, the auditor also checks whether stock movements between the count date and December 31 have been properly recorded. If attending is impracticable, the auditor looks for evidence through alternative procedures, and if that evidence is insufficient, the standard requires a modified audit opinion.

What the inventory order should include

The Law of Ukraine “On Accounting and Financial Reporting in Ukraine” leaves it to the owner (head) of the company to decide which items are inventoried and how often, except where an inventory is mandatory. The year-end inventory is one such case (paragraph 7 of section I of the Regulation). The head of the company sets up the inventory commission and approves the items, frequency and deadlines of the inventory by written order (paragraphs 1 and 3 of section II). In practice, this is a single internal order covering:

1. Grounds: the inventory before the annual financial statements are prepared.
2. Scope: assets and liabilities by storage location and by materially responsible person (MRP), meaning the employee accountable for the assets in their custody, with separate lists for assets held outside the company, in safe custody or under lease.
3. Timing: start and end dates for each group in the table above.
4. The members and chair of the inventory commission and, where the volume of work is large, working commissions as well.
5. When the inventory lists and reports go to the accounting team and when it prepares the reconciliation statements.
6. The date by which the commission draws up its minutes, allowing five working days for their approval.
7. How to handle any assets in a combat area or occupied territory (see below).

The Regulation itself requires the items, deadlines and commission membership, and the other points are added to keep the schedule on track. A procedure that repeats from year to year can be set out in an internal inventory policy (paragraph 22 of section II), so that the annual order only needs the dates, the commission members and the list of items.

Who sits on the inventory commission

The commission includes representatives of management, the accounting function and experienced employees who know the items being counted, their prices and the source records: engineers, commodity experts, economists. The accounting function can also be represented by outside providers who keep the company’s books, such as an audit firm, a centralized accounting office or a sole proprietor working under contract. This means a provider that keeps the books, not the independent auditor of the financial statements, whose role at the count is described above. The commission is chaired by the head of the company, a deputy or an authorized head of a business unit. If the head keeps the books personally, they chair the commission (paragraph 1 of section II).

The count is carried out by the full commission in the presence of the MRP. Two restrictions apply to working commissions. MRPs cannot sit on a working commission that checks assets in their own custody, and the same employee cannot chair a working commission checking the same MRPs two years in a row (sub-paragraph 2.4 of paragraph 2 of section II).

How to count and document the results

Before counting starts, the commission chair signs off the receipt and issue documents with the note “Before inventory as of (date).” The MRPs confirm in writing that all documents have been handed over to the accounting team, all receipts have been recorded and all disposals written off (paragraph 6 of section II). Tangible assets are counted, weighed or measured, while intangible assets and balances are verified against documents. For stock, the Regulation expressly prohibits entering quantities in the list based on what the MRPs say or on the accounting records without a physical check (sub-paragraph 4.2 of paragraph 4 of section III).

Item	How it is documented and what is checked
Fixed assets, intangible assets, stock, third-party assets on off-balance-sheet accounts	An inventory list with names, quantities and values; for fixed assets, also the inventory number, manufacturer, serial number (if any), year of manufacture, original cost, accumulated depreciation and useful life
Cash on hand, cash documents (such as prepaid vouchers), strict-reporting forms (serially numbered blanks)	An inventory report; the cash desk is checked under the Regulation on Cash Transactions in the National Currency in Ukraine (Resolution No. 148 of the Board of the National Bank of Ukraine of December 29, 2017)
Bank balances	Reconciliation of balances with bank statements, with the result recorded in an inventory report
Receivables and payables	An inventory report; the creditor sends statements to debtors to confirm the amounts; limitation periods are checked
Provisions, allowance for doubtful debts, deferred expenses and deferred income	An inventory report with calculations; the year-end vacation pay provision, including social insurance contributions, is based on the days of unused annual leave and average daily pay

Inventory lists, reports and reconciliation statements must meet the requirements for source documents set by the Regulation on Documentary Support of Accounting Records (Ministry of Finance Order No. 88 of May 24, 1995). They can be completed by hand or electronically and are prepared in at least two copies (paragraphs 14 and 21 of section II). Blots and erasures are not allowed, and every correction is signed by all commission members and the MRPs.

The accounting team then compares the lists with the books and prepares reconciliation statements, valuing surpluses and shortages at the amounts in the accounting records (paragraph 20 of section II). The commission establishes the reasons for any discrepancies and records its conclusions and proposals for resolving them in the minutes (paragraph 1 of section IV).

What to do with assets that cannot be reached

A separate rule applies to companies that were or are located in temporarily occupied territory or in combat areas. It also covers companies whose business units or separate property are located there (paragraph 8 of section I). They carry out the inventory when authorized staff have safe and unimpeded access to the assets, source documents and accounting registers.

The Regulation leaves the definition of combat areas to other legislation. In practice, companies rely on the List of Territories Where Hostilities Are (Were) Conducted or Temporarily Occupied by the Russian Federation, approved by Order No. 376 of the Ministry for Development of Communities and Territories of February 28, 2025. The List is updated regularly, so the category and dates of the territorial community (hromada, Ukraine’s basic local government unit) should be checked on the day of the decision and recorded in the internal order. A community’s status does not by itself postpone the inventory. What matters is whether authorized staff have safe and unimpeded access to the assets and documents.

Once the obstacles are gone, the inventory is carried out as of the first day of the following month, and the results are recorded in that reporting period. If specific property is known to have been stolen, destroyed or damaged, the head of the company can order an inventory of that property as of the day these facts were established.

A postponed inventory does not settle the valuation question. Companies reporting under national standards apply National Accounting Regulation (Standard) 28 “Impairment of Assets” (NP(S)BO 28) to non-current assets. It requires an assessment at the annual balance sheet date of whether there are indications of impairment, physical damage among them. For companies reporting under International Financial Reporting Standards (IFRS), the same assessment is required by International Accounting Standard (IAS) 36, which has the same title. The assessment is made even for property that cannot be physically counted.

On October 22, 2025, the Ministry of Finance published draft amendments to the Instruction on the Chart of Accounts: separate third-level accounts for assets damaged, destroyed or stolen as a result of armed aggression, or over which control has been lost, and an off-balance-sheet subaccount 073 for assessed losses. Under the draft, such assets stay on the balance sheet, net of impairment losses, until a decision is made to write them off. As of October 15, 2026, these amendments had not been made to the Instruction.

For the 2026 financial statements, this means the following. As long as there is no safe access and no theft, destruction or damage of specific property has been established, no inventory differences for that property will appear in the statements: they will appear once access is restored and the property is counted as of the first day of the following month. The impairment assessment as of December 31, 2026, is made in any case, whether or not the property could be counted.

How to record surpluses and shortages

Section IV of the Regulation sets out how to record the surpluses and shortages found:

Finding	How to record it
Surplus fixed assets and intangible assets	Recognize at fair value (sub-paragraph 1.5 of paragraph 1 of section III) with a corresponding increase in deferred income
Surplus cash, securities, stock and other current assets	Recognize with a corresponding increase in income for the reporting period
Stock shortages within natural loss allowances	Write off to expenses by order of the head of the company, but only after offsetting any regrading differences
Shortages above the allowances, losses from spoilage	Remove from the balance sheet and charge to the persons responsible; if they are not identified, carry the amount on an off-balance-sheet account until they are identified or the case is closed

If no natural loss allowances exist for a product, any loss is treated as a shortage above the allowance. As a general rule, regrading differences (mix-ups between similar items) can be offset only for stock with the same name, in identical quantities, for the same period and held by the same MRP. Ministries and other authorities can allow a wider offset within a group of similar stock, but only for enterprises under their management (paragraph 5 of section IV). Private companies can only apply the general rule.

VAT on inventory results

For goods purchased with VAT, the key question is whether to accrue compensating tax liabilities under clause 198.5 of the Tax Code of Ukraine, that is, VAT the company charges itself on written-off goods. The base for this charge is the purchase cost of the goods (clause 189.1 of the Tax Code). For goods purchased before July 1, 2015, the rule applies only if the VAT was included in the input VAT credit at the time.

What happened	VAT consequences
Goods written off because of shortages or spoilage above natural loss allowances	Compensating tax liabilities are accrued. A consolidated tax invoice (issued by the company to itself) is drawn up no later than the last day of the reporting period in which the goods were written off and registered in the Unified Register of Tax Invoices within the deadlines set by the Tax Code
Shortage within natural loss allowances	No liabilities are accrued if the cost of the losses is included in the cost of finished products subject to VAT
Shortage recorded in a selective (partial) inventory report prepared at the tax authority’s request during a tax audit	Compensating tax liabilities are accrued: the Tax Code expressly treats such goods as used outside business activities, unless they were destroyed by force majeure confirmed in accordance with the law (last paragraph of clause 198.5)
Fixed assets liquidated at the taxpayer’s own decision	Treated as a supply at the usual price, but not below the carrying amount at the time of liquidation (clause 189.9 of the Tax Code)
Fixed assets destroyed by force majeure, stolen (as confirmed in accordance with the law) or covered by a document submitted to the tax authority on their destruction, dismantling or conversion that makes them unusable for their original purpose	The usual-price supply rule does not apply (second paragraph of clause 189.9)
Goods destroyed or lost by force majeure during martial law	Clause 198.5 does not apply (clause 32-1 of sub-section 2 of section XX of the Tax Code)

The first two rows reflect the position of the State Tax Service (STS) in its ZIR knowledge base. It is best to collect documents on the cause of a loss straight away, before the inventory commission draws up its minutes. We covered how to document a fixed-asset write-off using the example of backup power equipment.

UHY Prostir provides outsourced accounting and prepares and files reports for clients. It also offers financial statement audits and tax consulting. If you need support with the 2026 year-end close or an assessment of the tax consequences of shortages, contact our team.

Nataliia Zavazhenko (Expert Accountant)