Law on Accounting of Montenegro

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 1 Pursuant to Article 95, point 3 of the Constitution of Montenegro I hereby pass the DECREE PROMULGATING THE LAW ON ACCOUNTING I hereby promulgate the Law on Accounting, adopted by the Parliament of Montenegro, the 27th legislature, in the fifth sitting of the Second regular (autumn) session in 2021, on 29 December 2021. Number: 01-1360/2 Podgorica, 30 December 2021 President of Montenegro, Milo Đukanović, m.p. Pursuant to Article 82, item 2 and Article 91, paragraph 1 of the Constitution of Montenegro, the Parliament of Montenegro, the 27th legislature, in the fifth sitting of the Second regular (autumn) session in 2021, on 29 December 2021 passed the LAW ON ACCOUNTING (Official Gazette of Montenegro, No 145/2021 of 31 December 2021, 152/2022 of 30 December 2022) I BASIC PROVISIONS Subject matter Article 1 This Law governs the classification of legal persons registered to pursue economic activities and parts of foreign companies (hereinafter referred to as: the legal person), the conditions and method of keeping books of accounts, the organisation of accounting, the preparation, presentation and publication of financial reports, the conditions and manner of the valuation of assets, and other matters of relevance to accounting. Exception to application Article 2 This Law shall not apply to the accounting and final annual accounts of the budget of the State, or the local self-government units. The definitions of terms Article 3

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 2 The terms used in this Law shall have the following meanings:

1. financial statements in accordance with International Accounting Standards (hereinafter referred to as: IAS) and International Financial Reporting Standards (hereinafter referred to as: IFRS) are:  statement of financial position (hereinafter referred to as: balance sheet);  statement of comprehensive income (hereinafter referred to as: income statement);  statement of cash flows;  statement of changes in equity;  notes to financial statements.
2. financial reports are a set of financial statements and other accompanying reports, including management reports, opinions, and other documents;
3. The International Accounting Standards Board (hereinafter referred to as: IASB) is an independent regulatory body of the International Financial Reporting Standards Foundation (IFRS Foundation);
4. The International Federation of Accountants (hereinafter referred to as: IFAC), is a global professional body in the field of accounting profession;
5. IFRIC (International Financial Reporting Interpretations Committee) is the IASB Committee responsible for analysis of accounting issues in the context of existing International Accounting Standards (IAS) and the IASB Framework;
6. Code of Ethics for Professional Accountants means a code adopted on the basis of the IFAC International Code of Ethics for Professional Accountants (ICEPA), defining the generally accepted standards of professional accountants’ behaviour;
7. statistical annex is a report on the data concerning a legal person, submitted together with the financial statements;
8. subsidiary legal person means a legal person controlled by a parent legal person;
9. group of legal persons means a parent legal person and all its subsidiary legal persons; 10)associated legal persons means two or more legal persons within a group of legal persons; 11)the competent authority means a public administration authority, an administration authority, a local self-government authority, or legal persons funded from the budget of Montenegro, or from the budget of the local administration; 12)projects mean operational activities governed by a single contract, license, lease, or concession and form the basis for payment of obligations to the competent authority, and if several such contracts are significantly interconnected, they are considered a single project. 13)International Valuation Standards (IVS) means standards and corresponding explanations of the standards issued or accepted by the International Valuation Standards Council (IVSC); 14)European Valuation Standards (EVS) means standards and corresponding explanations of the standards issued or accepted by the European Group of Valuers’ Associations (TEGOVA).

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 3 Use of gender-sensitive language Article 4 Expressions in this Law used for natural persons in the masculine gender shall include the same expressions in the feminine gender. II Preparation of Financial Statements and the Classification of Legal Persons The preparation of financial statements Article 5 Legal persons shall prepare financial statements according to the IAS, or IFRS, published by the IASB and endorsed for application and published by the public administration authority responsible for finance (hereinafter referred to as: the Ministry) or a legal person entrusted with the performance of such tasks, and which has obtained a right for translation and publication from the relevant IFAC body. The classification of legal persons Article 6 Legal persons shall be classified, depending on the average number of employees, total annual income and total assets, as follows:

1. micro-legal persons which do not exceed two of the three following criteria:  average number of employees up to ten,  total annual income up to 700,000.00 euro,  total assets up to 350,000.00 euro;
2. small legal persons which do not exceed two of the three following criteria:

• the average number of employees during the business year up to 50,
• total annual income up to 8,000,000.00 euro,
• total assets up to 4,000,000.00 euro;

3. medium-sized legal persons, which are not micro and small legal persons, and which do not exceed two of the three following criteria:

• average number of employees during the business year up to 250,
• total annual income up to 40,000,000.00 euro,
• total assets up to 20,000,000.00 euro;

4. large legal person which exceed two of the three criteria referred to in point 3 of this paragraph. The classification in accordance with the criteria referred to in paragraph 1 of this Article shall be carried out independently by the legal person on the date of preparing the financial statements, and data obtained, on the basis of which the classification was carried out, shall use for the next business year.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 4 The newly established legal persons shall be classified in accordance with paragraph 1 of this Article, on the basis of data from the financial statements for the current business year and the number of months in business, whereas the established data shall be used for the current and next business year. The average number of employees shall be calculated so that the total number of employees at the end of each month, including employees abroad, shall be divided by the number of months in the business year, or the number of months the legal person is in business. Where on the balance sheet date, a legal person deviates from the limit values of two of the three criteria referred to in paragraph 1 of this Article during two consecutive financial years, the legal person shall be obliged to make its classification in the appropriate category for the next business year. Consolidated statements Article 7 The parent legal person shall be obliged to prepare, submit and publish consolidated financial reports, in accordance with this Law, IAS, and IFRS. The parent legal person shall be obliged to prepare, submit and publish a consolidated management report. Consolidated annual financial reports shall be financial reports of a group wherein a legal person (hereinafter referred to as: the parent legal person) exercises control (dominant influence) over one or more subsidiary legal persons in determining financial and business policies, which present the group as a whole. The parent legal person is obliged to prepare consolidated annual financial reports, or a consolidated management report for a group of legal persons. Parent legal person Article 8 A parent legal person, within the meaning of this Law, shall be deemed to be a legal person, which:

1. has a direct or indirect majority of voting rights in another legal person;
2. is entitled to appoint or remove a majority of the members of the management or supervisory board or executive directors of another legal person, as a member or a shareholder in that legal person;
3. is entitled to exercise a decisive control (dominant influence) over another legal person of which it is a shareholder or member pursuant to a contract entered into with that legal person, on the basis of an instrument of constitution or articles of association of that legal person;
4. by exercising a voting right as a member or shareholder of subsidiary legal persons, appointed a majority of the members of the management, or supervisory

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 5 board, management board or executive directors, or other management or supervisory bodies of such legal persons, who have held such office during the preceding business year and are holding it in the current financial year up to the time when the annual financial reports are prepared; 5) controls a majority of shareholders’ or members’ voting rights in subsidiary legal person pursuant to an agreement with other shareholders or members of a that legal person and is at the same time a shareholder in or member; 6) on the basis of a contract, an instrument of constitution or articles of association, manages a parent or subsidiary legal person, on a unified basis, or 7) is obliged to apply IFRS individually or as a group and to prepare consolidated financial reports in accordance with these standards. In the events referred to in paragraph 1, items 1, 2, 4, and 5 of this Article, the voting rights, the rights of appointment or rights of removal held by a parent legal person shall be added to the equivalent rights of its subsidiary legal persons and rights of other persons acting in his own behalf, and for the account of legal persons or its subsidiary legal persons, while shall be removed the equivalent rights exercised on behalf of a person who is neither the parent legal person nor its subsidiary legal person; or exercised by the legal person within a contractual security instrument for payment, provided that the voting rights of the legal person are exercised in accordance with the instructions, or the interests of the person issuing the security instrument for payment. For the purposes of the determining the control (dominant influence) of the parent legal person referred to in paragraph 1, items 1, 4, and 5 of this Article, from the total voting rights in the subsidiary legal person shall be deducted the voting rights held by that subsidiary legal person, held by its subsidiary legal person or by a person acting in his own behalf and for account of those legal persons. Exemptions from consolidation Article 9 A parent legal person shall not be obliged to prepare consolidated annual financial reports for small groups of legal persons. Notwithstanding paragraph 1 of this Article, the parent legal person shall be obliged to prepare consolidated annual financial reports for small groups of legal persons that include public-interest entities. A parent legal person, which is a subsidiary legal person of another parent legal persons (the exempted legal entity) shall not be obliged to prepare consolidated annual financial reports and a consolidated management report, where the parent legal person:

1. is not an issuer of securities and other financial instruments admitted to trading on a regulated market;
2. is controlled by another parent legal person from another European Union Member State;
3. another parent legal person holds 90% or more its ownership, with approval of the remaining members of the legal person;

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 6 4) with subsidiary legal persons, except for legal persons not included in consolidation in accordance with law, are consolidated in the financial reports of another parent legal person from another European Union Member State; 5) publishes annual consolidated financial reports, consolidated management reports, and related audit reports. Public-interest entities, referred to in paragraph 2 of this Article, shall be:

• legal persons issuing securities and other financial instruments admitted to trading on a regulated market,
• banks and other financial institutions,
• insurance firms;
• legal persons classified in the category of large legal persons in accordance with this Law. Categories of groups of Legal Persons Article 10 Groups of legal persons, within the meaning of this law, shall be categorised as small, medium-sized and large groups. Small groups shall be groups of legal persons which, on the balance sheet date of the parent legal person, on a consolidated basis, do not exceed two of the following three criteria:
• the average number of employees during the business year up to 50;
• the total annual income up to 8,000,000.00 euro;
• total assets up to 4,000,000.00 euro. Medium-sized groups shall be groups of legal persons which are not small groups of legal persons and which on the balance sheet date of the parent legal person, on a consolidated basis, do not exceed two of the following three criteria:
• the average number of employees during the business year up to 250;
• total annual income up to 40,000,000.00 euro;
• total assets up to 20,000,000.00 euro. Large groups shall be groups of legal persons, which on the balance sheet date, on a consolidated basis, exceed two of the three criteria referred to in paragraph 3 of this Article. Where, on its balance sheet date, there is departure from the thresholds for two of the three criteria referred to in paragraphs 2 and 3 of this Article during two consecutive financial years, the group of legal persons shall be obliged to make its classification in the appropriate category for the next business year. A group of legal persons may be categorised in a corresponding group according to the balance sheet total and statement of profit and loss before consolidation eliminations, with an increase of 20% of the total assets and total income referred to in paragraphs 2 and 3 of this Article.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 7 III FINANCIAL STATEMENTS The preparation and submission of financial statements Article 11 A legal person shall be obliged to prepare annual financial statements and consolidated statements as at 31 December of the business year, or on the day of registration of status changes (merger, acquisition, division) and on the date of issue of a decision on voluntary liquidation of the legal person. The legal person shall be obliged to submit the financial reports and a management report in writing and electronic form to an administrative authority competent for assessing and collecting taxes (hereinafter referred to as: the Tax Administration) no later than 31 March of the current year for the preceding year. The legal person shall obliged to submit the consolidated financial reports and a consolidated management report in writing and electronic form to the Tax Administration no later than 31 May of the current year for the preceding year. The statements referred to in paragraph 1 of this Article shall also include a statistical annex. The Tax Administration shall be obliged to publish financial reports and management reports of legal persons referred to in paragraphs 2 and 3 of this Article on its website. Micro and small legal persons shall be obliged to submit to the Tax Administration a balance sheet, a statement of profit and loss, simplified notes, and a statistical annex. The obligation to prepare financial statements Article 12 Large legal person, medium-sized legal person and a legal person issuing securities and other financial instruments admitted to trading on a regulated market shall be obliged to draw up annual management report and a consolidated management report. A large legal person, medium-sized legal person and a parent legal person that is obliged to draw up consolidated financial statements and a legal person issuing securities and other financial instruments admitted to trading on a regulated market shall be obliged to submit to the Tax Administration financial and consolidated financial reports in accordance with IAS and IFRS. The management report referred to in paragraph 1 of this Article shall contain in particular:

1. a brief description of the business activities and organisational structure of a legal person,

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 8 2) a fair presentation of the development, analysis of the financial position and performance of the legal person, including financial and non-financial indicators consistent with the type of the business activity, as well as information on members of management and supervisory bodies, 3) information on investments for the purpose of environmental protection, 4) planned future development, 5) data on research and development activities, and especially investments in the education of employees, 6) the information concerning the acquisitions of own shares or stocks, 7) the existence of establishments, 8) data on financial instruments used if material for the assessment of the financial position and performance of the business and for the determination of assets, liabilities and capital, financial position and profit or loss, 9) information on the legal person’s financial risk management objectives and methods, including policy for avoiding or reducing loss for each major type of forecasted transaction for which risk hedging is used, 10)information on the legal person’s exposure to price risks, credit risks, liquidity risks, and cash flow risks; 11)objectives and policies of management of financial risk , risks and uncertainties of business, including hedging policy for each major type of forecasted transaction for which hedging is used. The consolidated management report shall, in addition to the information referred to in paragraph 3, items 1, 2, and 3 of this Article, shall include data on:

1. own shares or stakes acquired, the number and the nominal value or, in the absence of a nominal value, the accounting par value of all of the parent legal person’s shares, as well as shares or stakes of subsidiary legal persons of that parent legal person or by a person acting in his own behalf and for account of any of those legal persons,
2. main characteristics of internal control and risk management systems, for the legal persons included in the consolidation taken as a whole. The annual management report and the consolidated management report for joint stock companies, large legal persons, insurance firms, banks and other financial institutions, security clearing and depository companies, stock exchanges, investment firms, investment funds, investment fund management companies, voluntary pension funds, voluntary investment fund management companies, and other collective investment schemes shall contain an overview of the corporate governance rules they use. Notwithstanding paragraph 3 of this Article, the medium-sized legal persons shall not be obliged to include non-financial information in the management report. Reports referred to in paragraphs 1 and 2 of this Article shall be submitted to the Tax Administration by 31 March of the current year for the preceding year. Micro and small legal persons shall not be obliged to draw up a management report.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 9 Audit report Article 13 The audit report shall contain in particular:

1. an introduction, which states the financial reports that are subject of the audit, together with the financial reporting framework that has been used or applied in their preparation,
2. a description of the scope of the audit, with reference to the auditing standards in accordance with which the audit was conducted,
3. an audit opinion expressing the assessment whether the annual financial reports give a true and fair view of the financial position in accordance with this Law,
4. matters to which the auditor emphasised without stating a qualified opinion,
5. the opinion on whether the management report is consistent with the annual financial reports for the same business year,
6. the opinion on whether the management report has been prepared in accordance with this Law,
7. the statement whether, in the light of the knowledge of the operation and business environment of the legal person, the auditor identified material misstatement, with the indication of the nature of any such misstatements. The provision of paragraph 1, items 1 to 4 of this Article shall also apply to consolidated financial reports. The provision of paragraph 1, items 5, 6, and 7 of this Article shall also apply to consolidated management reports. The auditor shall be obliged to audit the parts of the statement on the application of the corporate governance code referred to in Article 15, paragraph 1 items 3 and 4 of this Law and provide an opinion in accordance with paragraph 1 of this Article. The auditor’s opinion may be unqualified, a qualified opinion or an adverse opinion, or the authorised auditor may have a disclaimer opinion. Non-financial Report Article 14 Large legal persons and parent legal persons of a large group exceeding during a business year more than 500 employees on their balance sheet date, shall be obliged to include in the management report or through a special non-financial report data and the information, including in particular:
8. a brief description of the business model of a legal person;
9. a description of the policies pursued by the legal person in relation to social and human resources matters, the matters of environmental protection, respect for human rights, anti-corruption, including due diligence processes implemented;
10. the outcome of policies undertaken;
11. the principal risks associated with the matters referred to in item 2 of this paragraph linked to the legal person’s operations, including, where relevant,

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 10 business relationships, products or services which may cause adverse impact in those areas, including the management of those risks; 5) non-financial key performance indicators relevant to the particular business. Where a legal person does not pursue measures referred to in paragraph 1 of this Article, it shall be obliged to provide a reasoned explanation for not doing so in the non-financial report. The non-financial report shall include, where appropriate, references to the amounts and additional explanations of such amounts disclosed in the annual financial reports. Exceptionally, if the management bodies and the supervisory board consider that the publication-inclusion of information on impending business developments or matters in the course of negotiation could be seriously prejudicial to the commercial position of the legal person, they may exclude such information from the management report or non￾financial report with a reasoned explanation. A legal person which is a subsidiary legal person shall not be obliged to draw up the report referred to in paragraph 1 of this Article if included in the consolidated management report or the separate non-financial report of another legal person, drawn up in accordance with Article 12 of this Law. Where a legal person publishes data and the information referred to in paragraph 1 of this Article together with the management report referred to in Article 12, paragraph 3 of this Law or at the website referred to in the management report within a period not exceeding six months after the balance sheet date, it shall not be obliged to prepare a separate non-financial report. An authorised auditor or an audit firm shall be obliged to check during the audit process whether the management report or the separate non-financial report were provided. Statement on Application of the Corporate Governance Code Article 15 Public-interest legal entities shall be obliged to include in the annual management report as a specific section, in particular:

1. statement on the application of the corporate governance code, with information about:

• the corporate governance code to which the legal person is subject,
• the corporate governance code which the legal person may have voluntarily decided to apply,
• corporate governance practices applied, the application of which is not mandatory in accordance with this Law,

2. statement on departure from application of a corporate governance code, both statutory or voluntarily, with an explanation as to which parts of the corporate governance code it departs from and the reasons for doing so;
3. a description of the main features of the legal person’s internal control and risk management in relation to the financial reporting process;

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 11 4) data on significant direct and indirect shareholdings of the legal person, including indirect shareholdings through pyramid structures and cross-shareholdings; the holders of securities with special control rights and a description of those rights; restrictions on voting rights (limitations of the voting rights of a given percentage, number of votes, periods for restricting voting rights), or if with the cooperation of the legal person, the financial rights attached to securities are separated from their holding; the rules governing the appointment and removal of members of management, precisely executive directors, supervisory or management board, and the amendment of the articles of association of the powers of members of management, executive directors, supervisory or management board, and in particular in terms of the power to issue shares of the legal person or acquire own shares; 5) data on the composition and operation of executive, management and supervisory bodies and their committees; 6) description of the diversity policy that is applied in connection with the management bodies of the legal person with regards to aspects (age, gender or education and profession), as well as stating the goals of the diversity policy, the way in which it is implemented and the results in the reporting period, and if such a policy is not implemented, the report must contain an explanation for the non￾implementation. Report on the payment of fees Article 16 A public-interest entity performing an economic activity in the mining and quarrying industry or an economic activity of forest logging shall be obliged to draw up and publish a report on paid concession and other fees to the competent authority. The obligation referred to in paragraph 1 of this Article shall not apply to subsidiary or parent legal persons, if payments of legal persons to the competent authorities are included in the consolidated report on payments to the competent authorities drawn up by that parent legal person in accordance with Article 17 of this Law. If the total amount of payment of the legal person referred to in paragraph 1 of this Article, whether made as a single payment or as a series of related payments, in cash or in kind, does not exceed 100,000.00 euro in the business year, the legal person shall not be obliged to draw up a report on the payment of concession and other fees. The report on the payments to the competent authorities shall contain in particular data on economic activities referred to in paragraph 1 of this Article and monetary amounts, and as follows:

1. the total amount of payments made to the competent authorities,
2. the total amount per type of payment, and as follows: a) royalties; b) dividends; c) signature, discovery and production bonuses; d) license fees, rental fees and other considerations for licenses and/or concessions, other fees and payments for infrastructure improvements,

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 12 3) if payments are made in accordance with a specific project, the amount of payments by type referred to in item 2 of this paragraph for each individual project shall be recorded, as well as the total amount of payments. The payments referred to in paragraph 4 of this Article shall represent the essence of the payment or economic activity in question. The report referred to in paragraph 1 of this Article shall be submitted to the Tax Administration by 31 March of the current year for the preceding business year. The report referred to in paragraph 1 of this Article shall be published on the website of the Tax Administration. Consolidated report on the payment of fees Article 17 Parent legal persons with subsidiary legal persons referred to in Article 16 paragraph 1 of this Law shall be obliged to draw up consolidated reports on payments of fees to the competent authorities. The report referred to in paragraph 1 of this Article shall include only payments arising from pursing the economic activities in mining and quarrying or the economic activity of forest logging. The parent legal person shall not be obliged to draw up the consolidated report referred to in paragraph 1 of this Article:

1. for small groups, except where any member of the group is a public-interest entity;
2. for medium-sized groups, except where any member of the group is a public￾interest entity;
3. if a subsidiary legal person is also a group member of another parent legal person headquartered in Montenegro. A legal person or public-interest entity shall need not be included in a consolidated report on payments to the competent authorities, if:
4. due to long-term restrictions the parent legal person is prevented from the exercise of rights over the assets of that legal person or over management of that legal person,
5. data necessary for the preparation of the consolidated report on payments to the competent authorities cannot be obtained without disproportionate high expense or significant delay;
6. the shares/stocks of that legal person are held exclusively with a view to their subsequent resale in short time. The provision of paragraph 4 of this Article shall apply solely if the restrictions exist in the consolidation process. The report referred to in paragraph 1 of this Article shall be submitted to the Tax Administration by 31 May of the current, for the previous business year.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 13 The report referred to in paragraph 1 of this Article shall be published on the website of the Tax Administration. Submission of financial statements Article 18 A legal person issuing securities and other financial instruments admitted to trading on a regulated market, as well as a parent legal person that is obliged to draw up consolidated financial statements, shall be obliged to prepare and submit the annual and quarterly financial statements to the Capital Markets Commission of Montenegro (hereinafter referred to as: the Commission), in writing and electronic form. The Commission shall publish the financial statements referred to in paragraph 1 of this Article on its website. The content, deadlines and manner of the preparation and submission of the statements referred to in paragraph 1 of this Article shall be stipulated by the Commission. Notwithstanding paragraph 1 of this Article, banks shall be obliged prepare and submit annual and quarterly financial statements to the Central Bank of Montenegro (hereinafter referred to as: the Central Bank), in writing and electronic form, whereas insurance firms shall prepare and submit annual and quarterly financial statements to the Insurance Supervision Agency (hereinafter referred to as: the Agency), in writing and electronic form. The Central Bank and the Agency shall publish the financial statements referred to in paragraph 4 of this Article on their websites. The content, deadlines and manner of the preparation and submission of reports of banks referred to in paragraph 4 of this Article shall be stipulated by the Central Bank, whereas the contents, deadlines and manner of the preparation and submission of the statements by insurance firms shall be stipulated by the Agency. Regulations governing electronic administration, electronic identification and electronic signature, electronic document, electronic commerce, information security, free access to information and personal data protection shall apply to procedures conducted electronically. The liability and obligation to prepare and publish financial reports and management reports Article 19 The members of the management and supervisory bodies of a legal person shall be jointly liable for the preparation and publication in accordance with this Law, of:  annual financial reports, management reports, and statements on the application of the corporate governance code; and

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 14  consolidated financial reports, consolidated management reports and consolidated statements on the application of the corporate governance code. IV BOOKS OF ACCOUNT AND THE CERTIFICATION OF ACCOUNTANTS Keeping of the books of account Article 20 Legal persons shall be obliged to keep the books of account. Books of account shall be kept under the double-entry bookkeeping system. Books of account shall be journal, a general ledger and subsidiary records. A legal person shall be obliged to register all business transactions and keep their records in the books of account. Business transactions shall be recorded using the accrual basis of accounting. The accounting records must be based on credible accounting documents, in accordance with the sound bookkeeping principles, and must present a true financial position and performance of operations. Persons authorized to keep books of account Article 21 Books of account shall be kept and financial statements of a legal person shall be drawn up by a person designated by a general act of a legal person. The keeping of the books of account and the preparation of financial statements referred to in paragraph 1 of this Article may be performed by a person who has not been convicted of a crime rendering him unfit to exercise accounting duties. Books of account shall be kept in writing and electronic form. A legal person may entrust the keeping of books of account and the preparation of financial statements to a business undertaking, or entrepreneur, or a natural person not employed by the legal person.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 15 The inventory of assets and liabilities Article 22 A legal person shall be obliged to take inventory of its assets and liabilities at the end of the business year. A legal person shall be obliged to adjust book of accounts to inventory of assets and liabilities, and record ending balance as at 31 December of the business year. The Ministry shall stipulate the manner and deadlines to take inventory referred to in paragraph 1 of this Article. Safekeeping of the books of account Article 23 The legal person shall be obliged to maintain the books of account, and as follows:

1. annual payrolls of employed persons or original payslips for periods for which annual payrolls signed by employees are not available - permanently,
2. financial reports (year-end accounts), the general ledger and the supporting journal for at least ten years, whereas the subsidiary books and interim financial statements for at least five years,
3. the accounting documents serving as basis for bookkeeping entries for at least five years, whereas sales and control slips, auxiliary forms and similar documentation, as well as documents related to payment operations in an institution performing payment operations, for at least three years. Financial reports, books of account and accounting documents referred to in paragraph 1 of this Article shall be kept in original form. Certified Accountant Article 24 The professional qualification of a certified accountant may be conferred upon a person who:
4. holds a VII1 level of educational qualification;
5. has three years of work experience in accountancy;
6. has passed the examinations set out by the certification programme established by the Ministry, or a legal person entrusted with the performance of those tasks in accordance with the IFAC Education Standard;
7. has not been convicted of a crime rendering him unfit to perform accountancy jobs. The Ministry or a legal person entrusted with the performance of such tasks shall organise taking of the examination to obtain a qualification of a certified accountant.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 16 The certified accountant shall be obliged to act in accordance with the Code of Ethics for Professional Accountants, published by a legal person entrusted with the performance of such tasks, which has obtained a translation and publication copyright from the relevant IFAC body. The Ministry shall stipulate conditions for and method of submitting the documentation required to obtain the qualification of a certified accountant. The Ministry, or a legal person entrusted with the performance of such tasks referred to in paragraph2 of this Article, shall establish the fulfilment of the conditions referred to in paragraph 1 of this Article and shall issue the certificate. Certificate obtained abroad Article 25 A qualification of a certified accountant may also be obtained by a person who has obtained the qualification of a certified accountant from an organisation that is a member of the IFAC, provided that the programme under which the applicant has acquired professional qualification is equivalent to the training programme and taking the examination of the Ministry or a legal person entrusted with the performance of such tasks. Detailed conditions and the manner of submitting the documentation for the recognition of certificates obtained from an organisation that is a member of the IFAC or IASB shall be prescribed by the Ministry or a legal person entrusted with the performance of such tasks. V VALUATION True and objective valuation Article 26 Valuation shall be an economic activity of a true and objective assessment of the value of the assets of a legal person and a natural person and entrepreneurs, and so as follows: property, plant, equipment, other assets and capital, for the purposes of accounting reports and other needs, in accordance with the methodology of asset valuation carried out by a certified valuer. Public administration authorities, the competent authorities of the local self-government units and the authorised public services bodies shall be obliged to apply the methodology referred to in paragraph 1 of this Article in the procedure of valuation of the public property, property of legal persons and natural persons, in accordance with the law. The Ministry shall stipulate the methodology referred to in paragraphs 1 of this Article, in accordance with the International Valuation Standards and the European Valuation Standards.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 17 Licensing of the valuer Article 27 The valuation referred to in Article 26 of this Law may be performed by a natural person holding the title of a certified valuer and a license to carry out valuation (hereinafter referred to as: the license), issued by the Ministry. The certified valuer shall be obliged to carry out the valuation of assets of a legal person and a natural person and an entrepreneur, and so as follows: property, plant, equipment, other assets and capital, for accounting and other purposes, in a true, objective and accurate manner in accordance with the International Valuation Standards and European Valuation Standards. Granting of a certified valuer designation Article 28 The taking of the examination for the designation of a certified valuer shall be organised by the Ministry or by a legal person entrusted with the performance of such tasks, which is a member of the International Valuation Standards Council (IVSC) or the European Group of Valuers’ Associations - TEGOVA. The Ministry shall stipulate the method for the granting of the designation, the examination taking programme, and other issues of importance to obtain the designation of a certified valuer Designation of a certified valuer Article 29 The designation of a certified valuer may be granted to a natural person who has passed the examination for the valuation in accordance with a programme established by the Ministry or a legal person entrusted with the performance of such tasks. The examination for a certified valuer referred to in paragraph 1 of this Article shall be carried out before a commission formed by the Ministry, or a legal person entrusted with the performance of such tasks. The content of the certificate of passed examination for a certified valuer (hereinafter referred to as: the certificate), the composition and method of work of the commission, the amount of fee for taking the professional examination and the documentation to be submitted for the issuance of the certificate shall be prescribed by the Ministry or a legal person entrusted with the performance of such tasks. A fee shall be paid for taking the examination referred to in paragraph 2 of this Article.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 18 The fee referred to in paragraph 4 of this Article shall be paid by the applicant for taking the examination. The chairperson and members of the commission for taking the examination for the certified valuer shall be entitled to remuneration. Issuing a license for the performance of valuation Article 30 The Ministry may issue a valuation license at the request of a person who:

1. has acquired the qualification of a certified valuer;
2. has a VII1 level of educational qualification;
3. has three years of experience in the valuation activities;
4. has not been convicted of a crime rendering him unfit to carry out valuation activities. The Ministry shall grant a license to a person who meets the requirements referred to in paragraph 1 of this Article, within 15 days, from the date of submission of the duly made application. The Ministry shall stipulate the manner of issuing a license, the composition and manner of work of the commission for issuing a licence, and the documentation to be submitted for the issuance of a license. Liability insurance Article 31 A certified valuer shall be obliged to conclude a contract on compulsory insurance against liability for damages which could be caused to a person for whose needs the valuation of assets is carried out, before the commencement of performance of work. The Ministry shall stipulate the sum insured referred to in paragraph 1 of this Article. Registry of Certified valuers Article 32 A certified valuer shall be registered in the register of certified valuers which shall be kept and published by the Ministry on its website in an open format. The register of certified valuers shall contain:
5. name, surname, address of permanent or temporary residence of the certified valuer;
6. the number and date of the decision on the issuance of a valuation license and the authority that issued the license;
7. the number and date of the decision on withdrawing a valuation license and the authority that issued the license.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 19 The certified valuer shall be obliged to notify the Ministry about the change of data entered in the register of certified valuers, at the latest within seven days from the day of the change. Withdrawing a license to a certified valuer Article 33 The Ministry shall withdraw the license of a certified valuer who carries out valuation activities in an unprofessional, non-objective and a manner non-compliant with the International Valuation Standards and the European Valuation Standards. The Ministry shall withdraw the license of a certified valuer who has been convicted of a criminal offense that makes him unfit to carry out valuation work. The person referred to in paragraphs 1 and 2 of this Article to whom the Ministry has withdrawn the license shall be prohibited from carrying out the valuation activities. The Ministry shall adopt a decision to withdraw a license to a certified valuer. The decision referred to in paragraph 4 of this Article shall be subject to an administrative dispute. VI OVERSIGHT Article 34 The Ministry and the Tax Administration shall carry out oversight over the implementation of this Law and the regulations adopted pursuant to this. The inspector of the Ministry shall carry out the oversight in accordance with the law governing inspection control, and shall have the authority to examine:

1. whether legal persons organised accounting operations in accordance with this Law,
2. whether the books of account and accounting records are kept in accordance with this Law. In addition to the obligations and powers determined by the law governing the inspection control, the inspector of the Tax Administration shall have the obligation and authority to examine:
3. the accuracy of classification of legal persons into micro, small, medium-sized and large;
4. the accuracy of classification of groups of legal persons into micro, small, medium￾sized and large;
5. whether legal persons submit to the Tax Administration annual financial statements, consolidated statements, management reports and consolidated

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 20 management reports, within the deadlines set forth in this Law and whether they are duly published; 4) whether financial statements contain also a statistical annex; 5) whether financial statements and consolidated statements have been signed by the responsible person; 6) whether legal persons have submitted an audit report with an opinion on the audit performed, in writing and electronic form to the Tax Administration, within the prescribed deadline and whether it was duly published; 7) whether the legal persons referred to in Article 18, paragraph 1 of this Law have submitted to the Commission annual and quarterly financial statements within the prescribed deadline, 8) whether the legal persons referred to in Article 18, paragraph 4 of this Law have submitted to the Central Bank, or to the Agency, annual and quarterly financial statements within the prescribed deadline. Article 35 Minutes shall be taken of the oversight performed with a legal person. A copy of the minutes shall be submitted to the legal person. Article 36 Where an inspector of the competent authority establishes that the provisions of this Law have been violated by a general or an individual act or action undertaken, he shall have the obligation and authorisation to:

1. order by way of the decision the removal of the established violation of this Law and determine the deadline within which such removal shall be carried out;
2. take other measures and actions for which authorised by law. Article 37 An appeal may be instituted before the Ministry against the decision of the authorised person. An appeal against the decision referred to in Article 36, paragraph 1 of this Law shall not postpone the execution of the decision. An administrative dispute may be instituted against the decision of the Ministry referred to in paragraph 1 of this Article.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 21 VII PENALTY PROVISIONS Article 38 A pecuniary penalty in the amount ranging from 500 euro to 16,500 euro shall be imposed on a legal person, if:

1. fails to prepare financial statements in accordance with the International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS) published by the IASB and endorsed for application and published by the Ministry or a legal person entrusted with the performance of those tasks, which has obtained a translation and publication copyright from the relevant IFAC body (Article 5);
2. fails to prepare annual financial statements and consolidated statements as at 31 December of the business year, or on the day of registration of status changes (merger, acquisition, division) and/or on the day of issuing a decision on voluntary liquidation of a legal person (Article 11, paragraph 1)
3. fails to submit to the Tax Administration in writing and electronic form financial reports and/or management report no later than 31 March of the current year for the preceding year (Article 11, paragraph 2);
4. fails to submit a statistical annex to the statements referred to in Article 11, paragraph 1 of this Law (Article 11, paragraph 4)
5. fails to submit annual and quarterly financial reports to the Commission in writing and electronic form (Article 18, paragraph 1);
6. fails to keep books of account under the double-entry bookkeeping system (Article 20, paragraph 2)
7. fails to register all business transactions and/or fails to keep their records in the books of account (Article 20, paragraph 4);
8. fails to adjust books of account to the inventory of assets and liabilities, and/or fails to record ending balance in the books of account as at 31 December of the business year (Article 22, paragraph 2);
9. fails to keep permanently records of annual payrolls of employed persons or original payslips signed by employees for periods for which annual payrolls signed by employees are not available (Article 23, paragraph 1, item 1); 10)fails to keep financial reports, general ledger or supporting journal for at least ten years and/or the subsidiary books and interim financial statements for at least five years (Article 23, paragraph 1, item 2); 11)fails to keep accounting documents serving as basis for bookkeeping entries for at least five years, and/or sales and control slips, auxiliary forms, similar documentation and documents related to payment operations for at least three years (Article 23, paragraph 1, item 3); 12)fails to keep the original financial reports, books of account and accounting documents referred to in Article 23, paragraph 1 of this Law (Article 23, paragraph 2). A pecuniary penalty in the amount ranging from 50 euro to 2,000 euro shall also be imposed on a responsible person in a legal person for the misdemeanour referred to in paragraph 1 of this Article.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 22 Article 39 A pecuniary penalty in the amount ranging from 50 euro to 2,000 euro shall be imposed on a natural person who performs a valuation, if:

1. performs valuation referred to in Article 26 of this Law and does not have the title of a certified valuer and license to carry out the valuation (Article 27, paragraph
3. before the commencement of the performance of work, fails to conclude a contract on compulsory insurance against liability for damages that could cause by his work to a person for whose needs the valuation is carried out (Article 31, paragraph 1)
4. fails to notify the Ministry about the change in the data entered in the register of certified valuers no later than within seven days from the date of the change at (Article 32, paragraph 3). VIII TRANSITIONAL AND FINAL PROVISIONS Adoption of Enabling Regulations Article 40 Enabling regulations for implementation of this Law shall be adopted within three months following the day this Law enters into force. Until the adoption of the enabling regulations referred to in paragraph 1 of this Article, enabling regulations adopted pursuant to the Law on Accounting (Official Gazette of Montenegro, No. 52/16) shall apply. The validity of certificates Article 41 Certificates of certified accountants issued in accordance with the provisions of the Law on Accounting and Auditing (Official Gazette of the Republic of Montenegro, No. 69/05 and Official Gazette of Montenegro, No 80/08 and 32/11) and the Law on Accounting (Official Gazette of Montenegro, No. 52/16) shall remain in force. Acquisition of a license Article 42 Persons who, by the date of entry into force of this Law, have performed valuation activities, shall be obliged, within three years following the day this Law enters into force, to acquire a license in accordance with this Law. Persons failing to acquire a license within the deadline referred to in paragraph 1 of this Article cannot perform the valuation activities.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 23 Aligning Operations Article 43 Business undertakings shall be obliged to align their operations with the provisions of this Law within one year following the day this Law enters into force. Deferred Application Article 44 Provisions of Article 9, paragraph 3, items 2 and 4 of this Law shall apply as of the accession date of Montenegro to the European Union. Repeal Article 45 The Law on Accounting (Official Gazette of Montenegro, No. 52/16) shall be repealed as of the day of entry into force of this Law. Entry into force Article 46 This Law shall enter into force on the eighth day following the day of its publication in the Official Gazette of Montenegro. Number: 06-2/21-2/4 EPA 314 XXVII Podgorica, 29 December 2021 The Parliament of Montenegro, 27th legislature The Speaker of the Parliament, Aleksa Bečić, m.p.

Official Gazette of Montenegro, No 145/2021, 152/2022 [unofficial translation] Law on Accounting 24 The consolidate text of the Law does not include the following provision of the Law Amending the Law on Accounting (Official Gazette of Montenegro, No 152/2022 of 30 December 2022): "Article 2 This Law shall enter into force as of the day of its publication in the Official Gazette of Montenegro.”