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DIRECTOR
THE COMMUNICATIONS REGULATORY AUTHORITY
OF THE REPUBLIC OF LITHUANIA

ORDER NO 1V-360
ON THE AMENDMENT OF THE ORDER NO 1V-1164 OF THE DIRECTOR OF THE
COMMUNICATIONS REGULATORY AUTHORITY OF THE REPUBLIC OF
LITHUANIA OF 28 DECEMBER 2005 “ON THE APPROVAL OF THE RULES FOR
COST ACCOUNTING ACCORDING TO THE FULLY DISTRIBUTED COSTS
METHOD“

7 April 2011
Vilnius

Pursuant to Paragraph 7 of Part 6 of Article 7, Article 23, Article 32, Part 1 of Article
33, Part 9 of Article 34 and Part 2 of Article 35 of the Law of the Republic of Lithuania on
Electronic Communications (Official Gazette Valstyb s žinios No. 69-2382, 2004):
1. I a m e n d Order No 1V-1164 of Director of the Communications Regulatory
Authority of the Republic of Lithuania of 28 December 2005 “On the Approval of the Rules
for Cost Accounting According to the Fully Distributed Costs Method”:
1.1. I c h a n g e the preamble to:
“Pursuant to Paragraph 7 of Part 6 of Article 7, Article 23, Article 32, Part 1 of Article 33,
Part 9 of Article 34, Part 2 of Article 35 of the Law of the Republic of Lithuania on Electronic
Communications (Official Gazette Valstyb s žinios No. 69-2382, 2004) as well as taking into
account the Directive 2002/19/EC of the European Parliament and of the Council of 7 March
2002 on Access to, and Interconnection of, Electronic Communication Networks and
Associated Facilities (the Access Directive) (OJ 2004, Special edition, Chapter 13, Volume 29,
p. 323) as amended by the Directive 2009/140/EC (OJ 2009 L 337, p. 37) of the European
Parliament and of the Council of 25 November 2009, the Directive 2002/22/EC of the
European Parliament and of the Council of 7 March 2002 on Universal Service End Users’
Rights Relating to Electronic Communications Networks and Services (the Universal Services
Directive) (OJ 2004, Special edition, Chapter 13, Volume 29, p. 323) as amended by the
Directive 2009/136/EC (OJ 2009 L 337, p. 11) of the European Parliament and of the Council
of 25 November 2009 and the European Commission Recommendation 2005/698/EC of 19
September 2005 on Accounting Separation and Cost Accounting Systems under the Regulatory
Framework for Electronic Communications (OL 2005 L 266, p. 64)”;
1.2. I r e c a s t by this Order Rules for cost accounting according to the fully
distributed costs method (attached).
2. I h e r e b y o r d e r that this Order be published in the Official Gazette
Valstyb s žinios.

Director Feliksas Dobrovolskis

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APPROVED by
Order No. 1V-1164 of the Director of the
Communications Regulatory Authority of the
Republic of Lithuania of 28 December 2005
(Amended by Order No. 1V-360 of the
Director of the Communications Regulatory
Authority of the Republic of Lithuania of
7 April 2011)

THE RULES FOR COST ACCOUNTING ACCORDING TO THE FULLY

DISTRIBUTED COSTS METHOD

I. GENERAL PROVISIONS

1. The rules for cost accounting according to the fully distributed costs method (hereinafter
referred to as the Rules) are aimed at creation of prerequisites for implementation of the Law of
the Republic of Lithuania on Electronic Communications (Official Gazette Valstyb s Žinios
No. 69-2382, 2004) (hereinafter referred to as the Law) and ensuring of electronic
communications regulation in the field of cost accounting in observance of the principles of
technological neutrality, functional equivalence, proportionality, minimal necessary regulation,
legal certainty in a dynamic market, economic development, ensuring efficient competition,
objectivity of regulatory criteria, conditions and procedures, transparency and non-
discrimination.
2. The Rules have been prepared pursuant to Paragraph 7 of Part 6 of Article 7, Article 23,
Article 32, Part 1 of Article 33, Part 9 of Article 34 and Part 2 of Article 35 of the Law as well
as taking into account the Directive 2002/19/EC of the European Parliament and of the Council
of 7 March 2002 on Access to, and Interconnection of, Electronic Communication Networks
and Associated Facilities (the Access Directive) (OJ 2004, Special edition, Chapter 13, Volume
29, p. 323) as amended by the Directive 2009/140/EC (OJ 2009 L 337, p. 37) of the European
Parliament and of the Council of 25 November 2009, the Directive 2002/22/EC of the
European Parliament and of the Council of 7 March 2002 on Universal Service End Users’
Rights Relating to Electronic Communications Networks and Services (the Universal Services
Directive) (OJ 2004, Special edition, Chapter 13, Volume 29, p. 323) as amended by the
Directive 2009/136/EC (OJ 2009 L 337, p. 11) of the European Parliament and of the Council
of 25 November 2009 and the European Commission Recommendation 2005/698/EC of 19
September 2005 on Accounting Separation and Cost Accounting Systems under the Regulatory
Framework for Electronic Communications (OL 2005 L 266, p. 64).
3. The Rules shall be applicable to the undertakings, having significant market power on the
relevant market which, according to the Law, have been imposed the obligations related with
cost accounting obligations according to the fully distributed costs method (hereinafter referred
to as the cost accounting obligations) and to the undertakings designated to provide universal
electronic communication services according to the procedure, set by the legal acts of the
Republic of Lithuania, which, in observance of the procedures, set by the legal acts, intend to
present the request to compensate the losses related with provision of the universal electronic
communication services (hereinafter individually referred to as an Undertaking).
4. The Rules shall not supersede the accounting and financial accountability requirements,
set by the Law of the Republic of Lithuania on Financial Accountability of Enterprises
(Official Gazette Valstyb s Žinios No. 99-3516, 2001; No. 79-3098, 2008), the Law of the
Republic of Lithuania on Consolidated Accounts of Group of Undertakings (Official Gazette
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Valstyb s Žinios No. 99-3517, 2001; No. 79-3099, 2008) and the Law of the Republic of
Lithuania on Accounting (Official Gazette Valstyb s Žinios No. 99-3515, 2001).
5. The Undertaking has to ensure that the information provided to The Communications
Regulatory Authority (hereinafter referred to as the Authority) according to the Rules shall be
accurate, fair, reasonable, comparable and comprehensive. All the documents provided to the
Authority by Undertaking according to Rules shall comply to the requirements of the Rules for
Submission of documents to the Authority of the Republic of Lithuania, approved by order No.
1V-292 of the Director or the Authority of 16 September 2004 (Official Gazette Valstyb s
žinios No. 141-5171, 2004; No. 73-2675, 2005)
6. Definitions:
“Working capital” means the difference between current assets and current liabilities used
in Undertakings activities.
“Accounting period” means the time period, coinciding with the fiscal year of the
Undertaking, for which the set of financial accounts is being prepared.
“Basic rate of profit” means the average annual rate of profit, i. e. non-risk rate of profit
of the long-term (no shorter than 10 years’) securities (bonds) of the Government of the
Republic of Lithuania.
“Common costs” means costs, which shall be neither directly nor indirectly assigned to a
specific service/product, and in distribution of which the principle of causality is impossible to
be implemented, however the said costs are mandatory for continuity of the activities of the
Undertaking.
“Wholesale service/product” means any service/product, which is provided to other
electronic communications operators and/or providers of electronic communications services,
which use that service/product as a resource for ensuring the provision of retail
services/products.
“Final service/product” means a wholesale or retail service/product being provided to the
user of the service.
“Price pressure” means the situation where the difference between the prices of the retail
and the corresponding wholesale services/products, set by an Undertaking with significant
market power is not sufficient in order for another efficiently operating electronic
communication service provider to be able to operate profitably by purchasing wholesale
services/products and providing analogue or similar retail services/products on the basis of
such wholesale services/products.
“Capital” means the financial resources, invested into production of the service/product.
The value of the capital is calculated by adding up the amounts of the owner’s equity and the
borrowed capital, specified in the balance statement of the undertaking or by adding up the
amounts of the capital goods and the employed capital.
“Adjustments” means the increase or reduction of the value of the capital due to the
change of the value of a fixed asset, upon evaluation of the current value of the fixed asset in
question or the increase or reduction of the value of the capital due to the general influence of
inflation, or a change of depreciation and/or amortization costs (positive or negative), resulting
from re-calculation of the value of the fixed assets by the current value.
“Logical change” means the change in the cost accounting system, used by an
Undertaking, which is related with changes of cost centers and relations among them (changes
in cost drivers), including change in specifications and reorganization of cost centers and cost
drivers mentioned.
“Retail service/product” means the service/product, provided to end service users.
“Modern equivalent price” means the market price of a fixed asset, equivalent to
employed fixed asset according to the functions performed and productivity ensured, but not
necessarily according to the efficiency.
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“Non-distributed costs” means the costs, incurred by an Undertaking during the
accounting period, however which costs are mandatory neither for provision of final
services/products (creation of value of products/services of regulated prices), nor for business
support (ensuring of uninterrupted electronic communication activities). The Undertaking shall
incur the said costs at the expense of its profit.
“Indirect costs” means the costs, which are indirectly related to a specific service/product
and distributed to different cost accumulation objects by using standard coefficients or cost
carriers/drivers, based on economic valuation.
“Indirect cost distribution” means distribution of an Undertaking’s costs to one or among
several cost centers, services/products and/or network components in proportion according to
the corresponding cost carrier/driver by using the impartial activity and/or financial
information for identification of the carrier distribution base.
“Standard coefficient” means the coefficient, showing the part of the costs to be
distributed to a specific cost center. Standard coefficients can be set as an economically based
fixed value or can be changed during each accounting period depending on the scope of the
corresponding cost carrier.
“Equity” means the right of the owners of an Undertaking to a part of property of the
Undertaking, remaining after deduction of all the liabilities from the total of assets.
“Backbone (transport) network” means the public telecommunication network,
connecting separate network components except those held as parts of access network (for
instance, the backbone public telephone communication network begins at the distribution
equipment unit, nearest to the termination point of the network, initiating the call and ends at
the farthest distribution equipment unit from the termination point of the network, terminating
the call).
“Revenues” means the increase of economic benefit of an Undertaking during the
accounting period, evidenced by an increase of the assets (or their value) of the Undertaking
and/or reduction of liabilities, resulting in increase of the equity, with the exception of the
additional contribution by the owners of the Undertaking.
“Service/product” means a public electronic communications service/product and/or the
service/product of the provision of the public electronic communications network.
“Total cost of a service/product” means the total amount of the costs, needed for
provision of one service/product.
“Access network” means the aggregate of links between the public telecommunication
network termination points and the nearest connections with the backbone (transport) network.
Access network begins at the network termination point and ends at the distribution equipment
unit, nearest to the network termination point.
“Reasonable return on investments” means the return on investments, which the
Undertaking would receive in case it decides to invest its capital into another similar low-risk
activity, which ensures the coverage of the cost of the capital, employed in the activities of the
undertaking. For the purpose of the Rules the reasonable return on investments is equated to
the costs of provision of the capital necessary for the activities of the undertaking.
“Significant difference” means the change in total costs of the service/product by 5 or
more per cent.
“Costs” means the decrease in the economic benefit of an Undertaking due to the
consumption of assets, sale of assets, loss of assets, reduction of assets value and assumption of
obligations during the accounting period when due to that owners’ equity decreases, with the
exception of its direct reduction. For the purpose of the Rules the non-received revenues for the
capital, in case it was to be invested in a market of similar risk i. e. the reasonable return on
investment is also attributed to the costs.
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“Cost accounting system” means the accounting system, needed for identification of total
costs of the products/services, provided by an Undertaking for the electronic communication
market regulation purposes.
“Costs center” means the main internal activity/process, supporting internal
activity/process, internal network activity/process or internal service/product, to which, in the
intermediate cost distribution phase a certain amount of indirect costs is attributed, in order to
allocate the indirect costs to the final services/products according to the principle of causality.
“Homogeneity of costs” means the feature, allowing for grouping of costs according to
their carrier and the trends of change of amount of costs with time (taking into consideration
such factors as development of technologies, increase of efficiency, etc.).
“Cost carrier/driver” means the factor, resulting in formation of specific costs, according
to which the formed costs are distributed to the cost centers and/or final services/products in
the cost accounting system.
“Cost article” means the group of costs, distinguished by an Undertaking, taking into
consideration the characteristics of the cost distribution process and the homogeneity of costs.
“Borrowed capital” means the long-term liabilities of an undertaking, for which the
Undertaking must pay later than within the time period of the fiscal year.
“Direct costs” means the costs, which directly and unambiguously result from provision of
a specific service/product.
“Network component” means any network equipment or element, which is a composite
part of a public telecommunication network and which can be physically or logically identified
as an independent element (segment) of the network.
“Assets” means tangible, intangible and financial valuables, which an Undertaking
manages, uses and/or disposes of, and in using which economic benefit is expected to be
derived.
“Internal activity/process” means an intermediate activity/process of an undertaking,
necessary for the Undertaking in creating the value of the end service/product, that is, in
providing end services/products.
“Average market revenue rate” means the average annual profit rate of a portfolio,
properly diversified by Lithuania’s securities market.
“Total costs of the service/product” means direct, indirect and joint costs of the
service/product.
Other definitions used in Rules shall be construed as they are given in the Law, the Law of
the Republic of Lithuania on Financial Accountability of Enterprises, the Law of the Republic
of Lithuania on Consolidated Accounts of Group of Undertakings and the Law of the Republic
of Lithuania on Accounting and the Rules for Provision of Universal Electronic
Communication Services, approved by Resolution No. 699 (Official Gazette Valstyb s Žinios
No. 55-2439, 2003; No. 23-749, 2006).

II. GENERAL COST ACCOUNTING REQUIREMENTS

7. The undertaking, while implementing a cost accounting system and managing the
accounting of costs must observe the following principles:
7.1. the principle of causation – following the principle of causation an Undertaking shall
allocate all costs incurred during the accounting period directly or indirectly to those
services/products, which determined the incurrence (formation) of these costs. The indirect
distribution shall be executed by identifying the cost carriers/drivers. Costs are distributed
indirectly then it is impossible to distribute costs directly;
7.2. the principle of accumulation – following the principle of accumulation an
Undertaking shall include all the costs related to earning revenues during the accounting period
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into the accounting and allocate them to the services/products according to the fact of earning
revenues and without taking into account the fact of receiving and paying money;
7.3. the principle of objectivity – following the principle of objectivity an Undertaking
shall allocate the costs incurred during the accounting period in an impartial manner without
seeking to distort the costs of any service/product or a structural part of any service/product
and without seeking to influence the decisions taken by the users of accounting information;
7.4. the principle of stability – following the principle of stability an Undertaking, when
calculating the services/products costs during different accounting periods shall constantly use
the chosen system of cost distribution, with the exception of the cases specified in Paragraphs
7.4.1 and 7.4.2 of these Rules. The cost distribution system used by an Undertaking shall be
subject to changes if:
7.4.1. significant events or circumstances that have occurred determine the necessity to
execute logical changes of the cost accounting system, used by the Undertaking;
7.4.2. the Authority requests to change the system used by the Undertaking when the system
differs from these Rules and (or) contradicts other legal acts;
7.5. the principle of transparency – following the principle of transparency an Undertaking
shall allocate costs incurred during the accounting period in such a way that every cost
distribution step and final statements of the accounting period shall provide the possibility to
clearly, transparently and in a simple way identify direct, indirect, common costs and internal
transfers of services and products, provided by the undertaking;
7.6. the principle of usefulness – following the principle of usefulness an Undertaking shall
prepare and use such a cost distribution system, which would be exhaustive, suitable and
understandable to both internal and external receivers of information being provided;
7.7. the principle of reliability – an Undertaking shall ensure that the submitted information
directly reflects the financial state of the undertaking and it does not contain any errors or
discrepancies.
8. An Undertaking shall include the specific costs to the cost accounting system only once –
when calculating the total cost of the products/services, the same costs can not be included
several times.
9. In case an Undertaking, assigned to provide universal electronic communication services
intends to present the request to compensate the losses, incurred when providing universal
electronic communication services according to the procedure, set by the legal acts of the
Republic of Lithuania, the Undertaking shall separate universal electronic communication
services and the related costs in the accounting system.

III. COSTS ESTIMATION

10. An Undertaking shall estimate the costs, incurred in its activities referring to the entries,
registered in the accounting records. Undertaking shall value costs in its cost accounting
system according to principles of historical cost accounting, except in cases mentioned in
Paragraph 11 of Rules, i. e. fixed assets used for activities of electronic communications shall
be valued at acquisition costs.
11. The Authority, striving for efficient competition in the field of electronic
communications, efficient usage of electronic communication resources and protection of
rights of users of electronic communication services may request an Undertaking to implement
current costs accounting for all its services or certain services/products. Prior to imposing such
requirement to a specific Undertaking the Authority shall consult according to the procedure,
set by the Rules for Public Consultations regarding Decisions of the Communications
Regulatory Authority of the Republic of Lithuania, approved by Order No. 1V-295 of the
Director of the Authority of 16 September 2004 (Official Gazette Valstyb s Žinios No. 141-
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5173, 2003; No. 115-4929, 2009). In case of the Authority requires to implement current cost
accounting for all or certain services/products, the Undertaking, during time period set by the
Authority, shall adjust the values of costs, transferred from the accounting records to the cost
accounting system in such a way, that transferred costs shall represent not actual acquisition
costs but current costs.
12. When calculating the depreciation and/or amortization of fixed assets, Undertaking must
select and apply an economically viable lifetime of fixed assets and depreciation and/or
amortization calculation method. The Undertaking shall reconcile depreciation and/or
amortization costs in cost accounting system with the corresponding depreciation and/or
amortization costs, calculated in the financial accounting.
13. When transferring the data from the financial accounting records to the cost accounting
system an Undertaking shall:
13.1. ensure the transfer of all and accurate data;
13.2. group the transferred costs at least into the cost groups, specified in Paragraph 14 of
the Rules. The Undertaking shall distinguish cost groups according to the homogeneity of the
costs. When ensuring the implementation of the principles, specified in Paragraph 7 of the
Rules the Undertaking can group the costs into more detailed groups, than those specified in
Paragraph 14 of the Rules.
13.3. ensure the possibility in the cost accounting system to verify the accuracy and
comprehensiveness of transfers of costs, i. e. an Undertaking must ensure the possibility to
identify the cost accounts, used in the accounting during the examinations of the cost
accounting system (according to the bookkeeping accounts plan, approved by the
Undertaking), from which specific amounts of costs were transferred to the cost accounting
system.
14. An Undertaking, when transferring incurred costs during its activities into the cost
accounting system, shall group the costs at least into the following groups:
14.1. direct costs (separately distinguishing the costs, related to provision of universal
electronic communication services, in case the Undertaking is assigned with provision of
universal electronic communication services);
14.2. payments to other operators for wholesale services/products;
14.3. depreciation and/or amortization costs;
14.4. network costs (network planning, management and development costs, network
equipment procurement, implementation, maintenance and repair costs);
14.5. the costs of provision of the information about subscribers of the public telephone
communication services (the costs of provision of information by telephone or presentation of
lists of subscribers (printed or electronic), excluding the electronic communication service
costs, necessary for provision of such information);
14.6. the costs of issuance of bills and settlement for the provided services/products;
14.7. human resources costs;
14.8. administrative costs;
14.9. financial and tax costs;
14.10. advertising, promotion and sales costs;
14.11. current repair and maintenance costs, not related to the network;
14.12. other distributed costs;
14.13. non-distributed costs.
15. An Undertaking shall transfer the non-distributed costs, which can be identified from the
accounting records, to the cost accounting system, however, when transferring such costs from
accounting records to the cost accounting system the Undertaking must attribute them to the
non-distributed costs. The Undertaking shall group other non-distributed costs, which cannot
be identified from the accounting records (for instance the joint costs, distributed to both
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electronic communication activity and other activities) and separate these costs during the cost
distribution process.
16. An Undertaking shall distinguish the reasonable return on investments as a separate cost
group in the cost accounting system.
17. The value of the capital, employed in the activities of an Undertaking shall be calculated
as the sum of the equity and borrowed capital, corresponding to the balance equation [1]:
K =E + D = FA + CA – CL – PR [1],
where:
K – the value of the capital employed in the activities,
E – equity,
D – borrowed capital,
FA – fixed assets used in activities,
CA – current assets,
CL – current liabilities,
PR – provisions.
18. When calculating the reasonable return of investments an Undertaking shall calculate
the value of the capital employed during accounting period as arithmetic average of values of
the capital employed at first day of the accounting period and at the last day of each quarter of
the accounting period.
19. An Undertaking shall calculate the cost of capital as the average weighted cost of
capital according to the following formula [2]:
WACC = RE * E/(E+D) + RD * D/(E+D) [2],
where:
E – equity,
D – borrowed capital,
WACC – weighted average cost of capital (%),
RE – cost of equity (%),
RD – cost of borrowed capital (%).
19.1. An Undertaking shall calculate the cost of the equity according to the cost of capital
model formula [3]:
RE = RF + * (RM - RF) [3],
where:
RE – cost of equity (%),
RF – basic rate of profit (%),
RM – market average rate of profit (%),
– beta coefficient, showing the issuer’s (undertaking’s) shares’ and the total shares
market’s risk ratio.
19.2. The cost of capital, borrowed by the Undertaking (RD) shall reflect the interest rate,
established on the market, for which the Undertaking received or could receive a long-term
loan (for the time period no shorter than 5 years) during the accounting period.
19.3. When calculating the cost of capital an Undertaking must evaluate the impact of the
profit tax to the cost of equity and the cost of the borrowed capital taking into consideration
whether the Undertaking, when transferring the costs from the accounting records to the cost
accounting system has eliminated the profit tax costs according to the requirements, provided
in Paragraph 21 of the Rules or distributed the costs to the services/products.
20. In case the Authority has reasons to believe that the risk of the activity of provision of
certain services/products of an Undertaking significantly differs from that of other
services/products, the Authority may require the Undertaking to determine separate value of
cost of capital for certain services/products when calculating the costs of provision of these
services/products. Prior to approval of this requirement the Authority shall consult according to
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the procedure, set by the Rules for Public Consultations regarding Decisions of the
Communications Regulatory Authority of the Republic of Lithuania. In case the Authority
requires the undertaking to set a separate value of cost of capital for certain services/products
when calculating the cost of such services/products, the undertaking shall, within the time
period, set by the Authority recalculate the value of the cost of capital, applicable to the
services/products and adjust the reasonable return on investments, attributed to such services
correspondingly and submit to the Authority the updated information on the costs of such
products.
21. According to Paragraph 8 of the Rules an Undertaking during calculation of reasonable
return on investment shall eliminate cost articles, recorded in the accounting records, which are
included in costs when calculating reasonable return on investments.
22. In case, referring to Paragraph 11 of the Rules the Authority requires the Undertaking
to implement current cost accounting for all or certain services/products, the Undertaking shall:
22.1. asses the current value of the capital, employed in its activities and calculate the
adjustments of the bookkeeping value of the capital, employed in its activities;
22.2. calculate the current costs of depreciation and/or amortization of fixed assets and the
corresponding adjustments. Adjustments of depreciation and/or amortization of fixed assets
shall be calculated as the difference between the amount of depreciation and/or amortization,
calculated upon evaluation of bookkeeping value of fixed assets and the amount of
depreciation and/or amortization, calculated upon evaluation of the current value of the fixed
assets. In addition the Undertaking must calculate the volume of capital, identify the
bookkeeping value and the adjustment amounts and separately distinguish them in the annual
report for the accounting period, submitted to the Authority according to Paragraph 50 of the
Rules;
22.3. can not restore value of the fixed assets, which value is equal to the liquidation value
in the accounting records;
22.4. use the following logical algorithm for calculation of the current value of fixed assets
when identifying the current value of the capital, employed in its activities [4]:
CC = min [ RC ; ma ( NRV; NPV ) ] [4],
where:
CC – current value of the fixed asset,
RC – Replacement cost of the fixed asset (identified according to the market price of an
identical (analogical) fixed asset (modern equivalent) or according to the performed functions
or capacities, and not necessarily according to efficiency; in both cases the Undertaking shall
use the value of new (not-operated) fixed asset),
NRV – net replacement (market) value of a fixed asset (identified according to the price of
a fixed asset, operated for a corresponding period, established in the secondary market),
NPV – net present value of a fixed asset (identified by discounting the revenues to be
generated by the specific fixed asset in the future according to the value of the weighted
average cost of capital (WACC), set in Paragraph 19 of the Rules).

IV. COST DISTRIBUTION

23. An Undertaking, when calculating the costs of the provided services/products

according to the Rules shall, in observance of the principle of causation, allocate the costs of
the accounting period between the services/products. In case direct distribution is not possible
the Undertaking, when allocating the costs of the accounting period between services/products
shall use the corresponding cost carriers/drivers. When setting the values of cost
carriers/drivers the Undertaking must use objective, documented information about activities
and/or financial information and observe the principles, listed in Paragraph 7 of the Rules.
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24. Numerical values of cots carriers/drivers (allocation coefficients) shall be based on the
information periodically collected and recorded by an Undertaking. If an Undertaking
determines the numerical values of these drivers by the method of selective observation
(sample selection), such selection shall be representative and carried out in accordance with the
principle of random selection and objectivity principle referred in Paragraph 7.3 of the Rules
and it should be assured that the deviation (error) is less than 1 per cent by confidence level of
95 per cent. If it is not possible to ensure such parameters of selection (sample selection)
because of objective reasons, an Undertaken, shall do the following:
24.1. carry out the selection according to the principle of objectivity referred in Paragraph
7.3 of the Rules and ensure that the estimate of numerical values of cost drivers obtained
represent actual situation;
24.2 when submitting information to the Authority, according to the Paragraph 50.4 of the
Rules, clearly distinguish the drivers which numerical values are determined by not complying
with requirements of random selection, representativeness, reliability and deviation (error) as
described above and describe the reasons and base the choose of such method.
25. The Undertaking shall ensure that estimation of numerical values of cost
carriers/drivers (distribution coefficients) is based on periodic documentation, carried out no
less than once a quarter. The Undertaking has a right to prove the estimate of numerical values
of cost carriers/drivers (distribution coefficients) according to documents collected at the end
of the accounting period if these numerical values are collected continually and correctness and
fairness of these values is guaranteed by control of Undertaking. The Undertaking has a right to
prove the estimate of numerical values of cost carriers/drivers according to documents prepared
once a year, if numerical values of cost carriers/drivers are constant. If Undertaking decides to
collect information, proving numerical values of cost carriers/drivers less than quarterly, it
shall provide arguments in System Description referred to Paragraph 43 of Rules. The
Undertaking shall allow the Authority and auditor (audit company) to verify the reliability,
fairness and correctness of numerical values of cost carriers/drivers used in cost accounting
system in all circumstances mentioned in this paragraph.
26. The Undertaking shall, following the principles specified in Paragraph 7 of these Rules
All the costs incurred, all incurred costs (with respect to the final services/products being
provided) distribute to one of following categories:
26.1. direct costs;
26.2. indirect costs;
26.3. common costs. The Undertaking shall form such a cost accounting system which,
during cost distribution process, would form the smallest possible part of common costs (no
more than 10 per cent of all the costs, incurred by the Undertaking during the accounting
period), i. e. the undertaking shall, taking into account the principle of causality, form the cost
accumulation centers in such a way that the largest part of costs would be distributed directly
or indirectly to services/products;
26.4. non-distributed costs.
27. The Undertaking shall distribute costs, belonging to direct cost articles, to the specific
services/products that caused the incurrence of these costs.
28. The Undertaking shall distribute costs, belonging to indirect costs articles, to services
(products) or groups of services (products) that indirectly caused the incurrence of these costs
via the intermediate cost centers. When allocating the indirect costs the Undertaking shall use
the cost distribution method, best ensuring the implementation of the principles, listed in
Paragraph 7 of the Rules. The Undertaking shall allocate all the indirect costs at least to the
following cost centers:
28.1. network cost center – the costs, related with the backbone (transport) and access
networks shall be allocated to the network cost center. Costs in this cost center must be stored
 10
Non-binding translation
according to separate network components, which are used for the provision of wholesale and
retail electronic communication services in the way, giving the possibility to identify the
network components, needed for the provision of a specific service/product;
28.2. cost center of main activities – the costs, related with the execution of the main
functions, necessary for the provision of services/products to their users (for instance issuance
of invoices, customer care and other costs, related with servicing of the users) shall be
allocated to the main activities cost center;
28.3. cost center of supporting activities – the costs, not related with provision of specific
services/products but which are an important part of the activities of the Undertaking (for
instance planning, human resources, financial costs) shall be allocated to the supporting
activities cost center.
29. For the purpose of ensuring successful implementation of the principles, set in
Paragraph 7 of the Rules an Undertaking:
29.1. shall establish a sufficient number of internal activities (processes) and intermediate
cost accumulation centers;
29.2. may detail the cost centers, foreseen in Paragraph 28.1 – 28.3 of the Rules and, when
allocating indirect costs, create more cost centers.
30. An Undertaking shall indirect costs, distributed to the cost centers, allocate to the
services/products. Such cost distribution must be executed by the Undertaking by using the
cost carriers, which reflect the causative relation of cost formation between the cost center,
whose costs are distributed and the cost center, to which the costs are distributed in the most
impartial way. The Undertaking shall prove that each indirect cost carrier corresponds to the
principles, foreseen in Paragraph 7 of the Rules.
31. The Undertaking shall distribute indirect costs according to principles referred in
Paragraph 7 of Rules and taking into account the following stages:
31.1. the costs of supporting activity shall be distributed to the cost center of main
activities, network cost center and services/products or groups of services/products;
31.2. the main activity costs shall be distributed to the network cost center and
services/products or groups of services/products;
31.3. network costs shall be distributed to services/products or groups of
services/products.
32. In order to ensure the observance of the principles, foreseen in Paragraph 7 of the
Rules when allocating costs, an Undertaking periodically and at least once per quarter of
accounting period shall:
32.1. review the internal activity and technology processes in order to receive the
information, necessary for the distribution of costs, including the reasonable return on
investments, between the services/products and, if necessary change the cost accounting
system correspondingly in due time;
32.2. form (establish) the verification of cost carries and update of cost carriers, in case it
is necessary due to the technological and/or other changes within the activities.
33. Common costs shall be distributed to services/products according to the sum of direct
and indirect costs, distributed to the specific service/product.
34. It is prohibited to allocate the costs, belonging to the non-distributed costs category to
the electronic communication services/products. The costs may be distributed for identifying
the total cost of other services/products than electronic communications services.
35. The Undertaking shall allocate the reasonable return on investments to
services/products according to the volume of capital, employed for the provision of the
corresponding service/product.
36. The Undertaking during process of cost attribution to final services/products, shall
clearly separate costs according taking into account how periodically costs are incurred (for
 11
Non-binding translation
example, service installation costs are incurred once; investments in equipment, required to
provide new service, can not be recovered by one-off charges as this shall be considered as
purchase-sell of equipment, not provision of the service).
37. The Undertaking to whom cost accounting remedy was imposed when calculating
costs of new services falling into particular regulated market (here in after – New regulated
services) shall calculate total costs of these services according to principles set below:
37.1. take into account information about costs of technologically similar services and
costs of services similar regarding structure of costs where costs have been calculated
according to Sections I – V of the Rules. In this case the Undertaking shall review costs similar
to actually provided service by taking into account difference between comparable services in
technological aspects as well as deference in provision of these services, or;
37.2. carrying out individual cost modeling of New regulated services according to
estimate or alternative sources of information, or;
37.3. applying methods mentioned in paragraphs 37.1 and 37.2 of these Rules.
38. The Undertaking shall calculate costs of New regulated services separately from costs
accounted in cost accounting system, but taking into account the principles of causality,
objectivity, transparency set in Paragraph 7 as well as taking into account principle of
efficiency, i. e. the Undertaking during estimation of cost of New regulated services shall:
38.1. include only those costs that are related with provision of New regulated services;
38.2. distribute costs objectively not aiming artificially to transfer costs to regulated
services or from regulated services and disclose the calculation in order easily evaluate cost
accounting (i. e. easily evaluate internal transfers and causality of costs);
38.3. attribute to New regulated services such amount of costs (resources) that is needed to
provide New regulated services efficiently;
38.4. estimate long run perspective of New regulated services (life cycle of the product),
i. e. estimate log run costs to provide a service;
38.5. proportionally and objectively estimate effects of economies of scale for retail and
wholesale services in order to ensure that total costs of wholesale services would not exceed
total costs of retail service that are using such wholesale services as inputs (i. e. by distributing
costs the situation of price pressure shall be avoided).
39. The Undertaking shall provide estimates of total costs of New regulated services,
calculated according to Paragraph 37 of the Rules, to the Authority in advance before
publishing public offer to provide these services.

V. SUBMISSION OF INFORMATION, RELATED TO THE COST ACCOUNTING

SYSTEM AND OTHER REQUIREMENTS, RELATED TO COST ACCOUNTING

40. The undertaking shall ensure the compliance of the cost accounting system with the
requirements, provided in the Rules. The Undertaking shall form such a cost accounting system
that would allow presenting information to verify how the Undertaking has implemented
obligation of cost accounting within the time period of 30 days at any moment of the
accounting period.
41. The Undertaking shall ensure the accuracy and correctness of the data, contained in the
cost accounting system.
42. The Undertaking shall store the information, allowing monitoring the changes of the
cost accounting system and the influence of such changes to the costs of services/products for
the time period of no shorter than 3 years.
43. If in decision of The Authority where Undertaking, having significant marker power in a
particular marker, was imposed an obligation of cost account, is not stated otherwise, this
 12
Non-binding translation
Undertaking shall within the time period of six months from the date of setting the said
obligation submit to the Authority and publish on its Internet website a comprehensive
description of the cost accounting system implemented (hereinafter referred to as the System
Description), comprised of such elements as detailed descriptions of accounting management
principles, strategies, methodologies and applicable procedures, cost distribution methods,
accumulation of cost carriers/drivers, approval and control procedures, adjustments and
approval of cost accounting system and other elements. The Undertaking in its System
Description shall indicate the time period to be held as the fiscal year of the Undertaking.
System Description is a free form document.
44. If obligation of cost accounting according to these Rules was already imposed on
Undertaking before obligation of cost accounting was imposed in particular market, such
Undertaking, if required to implement cost accounting obligation imposed, shall review and
submit to the Authority the reviewed System Description within one month after obligation of
cost accounting had been imposed.
45. After Rules being updated, the undertaking, which has obligation of cost accounting,
shall review System Description, submit it to the Authority and publish it on Undertaking’s
Internet website within 30 days after updates of the Rules took into effect.
46. The System Description must conform to the following principles:
46.1. the principle of objectivity – in the System Description an Undertaking shall show its
cost accounting system in an unbiased way, without distorting it and without attempting to
influence the decisions of the users of the information, provided by the System Description;
46.2. the principle of consistency – the System Description shall stay in force permanently
with the exception of the cases when according to Paragraphs 7.4.1 and 7.4.2 of the Rules the
cost accounting system is changed or in case the Authority requires to have the System
Description amended in case the System Description does not comply with the requirements,
provided by the Rules or other legal acts;
46.3. the principle of transparency – an Undertaking shall form the System Description in
the way, ensuring the possibility to identify economic logics and stages of distribution and re-
distribution of costs of all the types in a clear, transparent and simple way, starting from
transfer of the initial data to the cost accounting system and ending with calculation of the cost
price of the end service/products;
46.4. the principle of usefulness – an Undertaking shall prepare a comprehensive and
appropriate System Description, understandable to the information recipients, i. e. the
recipients of information should be able clearly understand what cost centers are used, what
costs are accumulated in cost centers, what logical relations are between the cost centers and
what cost drivers are used in allocating the costs.
47. The System Description to the Authority shall be provided with the following annexes:
47.1. plan of operation time periods of fixed asset and/or groups of fixed assets;
47.2. the list of cost carriers/drivers, including the economic meaning of each cost
carrier/driver, usage, frequency for accumulation of numeric values of cost carriers/drivers (in
example, constantly, weekly, monthly, quarterly) and place, where values are accumulated
(information systems, registers, documents proved by particular departments, report, etc.), as
well as control procedures to secure correctness and fairness of numeric values. This
information may not be provided to the Authority if such information submitted according to
provisions of the Rules for Accounting Separation and the Requirements related to Accounting
Separation, approved by Order No. 1V-738 of the Director of Authority of 14 June 2006
(Official Gazette Valstyb s žinios No. 70-2607, 2006);
47.3. the spreadsheet (matrix) of costs distribution, that would clearly show what cost
accumulation centers are used and how they are interrelated. The Undertaking shall ensure that
the spreadsheets (matrixes), mentioned in the present sub-paragraph will give recipients of
 13
Non-binding translation
information clearly and unambiguous identify all steps of cost distribution and redistribution
(levels) and the logical cost distribution basis, selected;
47.4. other information, proving that the cost accounting system, used by the Undertaking
has been developed in observance of the Rules and the System Description complies with the
principles, set in Paragraph 46 of the Rules.
48. All the annexes to the System Description, mentioned in Paragraph 47 of the Rules shall
be held integral parts thereof. In case of an amendment of the System Description, an
Undertaking shall amend annexes thereof, in case they are in conflict with the updated System
Description.
49. An Undertaking shall notify the Authority about logical changes in the used cost
accounting system:
49.1. within the time period of 30 days from the date of the changes in case such changes
result in significant differences;
49.2. with submission of the annual report, mentioned in Paragraph 50 of the Rules to the
Authority, in case the changes did not result in any significant differences.
50. An Undertaking must, once per accounting period, but not later than till the first day of
the sixth month of the following accounting period, prepare and submit to the Authority the
detailed annual report, sufficient for the Authority to assess whether the cost accounting
system, used by the Undertaking complies with the requirements, provided by the Rules and
other legal acts, approved by the Authority (hereinafter referred to as the Annual Report). In
the Annual Report the Undertaking shall present the following information with the exception
of the cases when the Undertaking presents the corresponding information to the Authority
when executing the rules on accounting separation, including the requirements, related with
accounting separation:
50.1 the report on calculation of the capital, employed in the activities of the Undertaking;
50.2. detailed plan of cost accounts (General ledger accounts), including subaccounts if such
are used, with filled in data of the accounting period and information how these cost accounts
were attributed to account categories of cost accounting system;
50.3. the description of fixed assets depreciation and amortization costs (according to Form
provided in Annex 1 if Rules) consisting of: identification code of a particular fixed asset
which could be linked to code of account (resource) of cost accounting system, name of the
fixed asset, date of acquisition, date of commencement of operation, the foreseen time period
of operation, acquisition cost, the foreseen liquidation value, the value at the beginning of the
accounting period, the value at the end of the accounting period, the amount of
depreciation/amortization during the accounting period, the method of calculation of
depreciation/amortization, other information. In case the Undertaking manages the cost
accounting according to the current value or has made a revaluation of assets, the Undertaking
shall additionally specify the current value (revalued value) of the fixed asset at the beginning
and at the end of the accounting period, the amount of depreciation/amortization during the
accounting period off the current value and the corresponding adjustment entries, which shall
show differences that formed due to method chosen for revaluation of fixed assets. The
Undertaking may additionally submit other information regarding identification of
depreciation/amortization costs of fixed assets;
50.4. the list of cost carriers/drivers, including their values, scope of application (the types
of costs, for distribution of which the specific cost carriers are used) and economical
grounding;
50.5. the report on calculation of reasonable return on investments during the accounting
period, including the specific calculation algorithm and the data, used for calculations and
other related information;
 14
Non-binding translation
50.6. the spreadsheet (matrix) forms, formed for each cost distribution stage, used for
provision of the information on the costs (name of costs, identification code, accumulated costs
to be distributed), distributed at each stage, the cost carrier and its values (name of cost
carrier/driver, identification code, total value of carrier/driver), according to which the
distribution is executed and the cost center, to which the costs in question are attributed and
what part of costs were attributed. Additionally, the Undertaking shall present report showing
which cost centers were attributed to the final services, i. e. the Undertaking shall present a
matrix showing the last stage of cost distribution to final services;
50.7. the report about total costs of final products/services for the present and previous
accounting periods (according to Form provided in Annex 2 of Rules) consisting of: the name
of each service/product, measurement units of service/product, the number of service/product
units, provided to the service users during the present and previous accounting period, the total
costs per each service/product and per service/product unit, the amount of return on investment
attributed to each service/product and the amount of revenues per each service/product and per
service/product unit for present and previous accounting periods;
50.8. The statement from the head of the Undertaking or his/her authorized person that the
cost accounting system and the submitted information complies with the directly applicable
legal acts of the European Union, regulating the implementation of the cost accounting
obligation, the provisions of the Rules and other legal acts, regulating the implementation of
the cost accounting obligation;
50.9. the explanatory letter, specifying the principles of preparation of the submitted reports
and other information, helping to comprehend the data, presented in the reports;
50.10. the set of annual financial accounts, prepared by the Undertaking in observance of
the Law of the Republic of Lithuania on Financial Accountability of Enterprises. In case the
Undertaking consists of several legal persons, the Undertaking shall submit to the Authority the
set of financial accounts of each of such persons and the set of consolidated financial accounts
according to the Law of the Republic of Lithuania on Consolidated Financial Accountability of
Group of Undertakings;
50.11. other information, allowing to verify that the undertaking has implemented the
requirements, provided in the Rules during the accounting period.
51. The Annual report and its explanations and supplementary documents form the integral
total of the financial information.
52. In case of request by the Authority the Undertaking shall, within the time period of 30
days explain the documents, submitted to the Authority and/or provide additional information.
53. The undertaking, to whom obligations of cost accounting and transparency had been
imposed, shall no later than till the first day of the sixth month of the following accounting
period, publish on its Internet website the System Description and information mentioned in
Paragraphs 50.1, 50.5, 50.8, 50.9 of Rules as well as other non-confidential information of cost
accounting which is necessary for interested market players to verify how Undertaking
implements cost accounting and price control remedies. The Undertaking then submitting the
Annual Report to the Authority shall specify information to be held as confidential according
to the requirements, provided by legal acts.
54. The Authority, seeking to asses adequacy and effectiveness of cost accounting system
and taking into account requirements of Rules on public consultations on decisions of the
Communications Regulatory Authority of the Republic of Lithuania may organize public
consultations regarding particular principles, not mentioned in Rules, but applied by
Undertaking in cost accounting system for cost accounting or regarding feasibility of methods
applied for purpose of implementation of remedies on price control.
55. The Authority in order to assess whether Annual Report and System Description is in
line with requirements of these Rules, once a year, but not later than until date referred in
 15
Non-binding translation
Paragraph 50, initiates verification (hereinafter – Verification). For Verification the Authority
use services of independent auditor (audit company). Costs of independent auditor (audit
company), participating in Verification, are covered by the Authority. The Authority, after
informing the Undertaking in advance (not later than 30 days until beginning of the audit), may
determine the beginning of the audit until date set in Paragraph 50 of these Rules, but not
earlier than two months until that date. The Undertaking shall provide all relevant information
for the Authority and auditor (audit company) for Verification and properly communicate with
the Authority and auditor (audit company). Opinion of the Authority for Verification and
opinion of the auditor are public and are published on Authority’s Internet website.

VI. FINAL PROVISIONS

56. In case the Authority in its decision regarding Undertaking, having significant market
where remedy of cost accounting is imposed, sets otherwise, this Undertaking, exempt
Undertakings mentioned in Paragraph 57 of these Rules, shall implement these Rules within
six months after remedy on cost accounting is imposed. If the day, when remedy on cost
accounting is imposed, is not first day of accounting period, the Undertaking shall prepare first
Annual Report for period, which begins on the day when cost accounting remedy was imposed
and ends on the last day of that accounting period.
57. In case Undertaking was oblige to implement cost accounting system according to these
Rules before the day when cost accounting remedy had been imposed in particular market, the
Undertaking shall within one month update its cost accounting system already implemented in
such a way, that it could provide information about costs of services of that particular market to
the Authority according to these Rules.
58. In case an Undertaking consists of two or more legal persons and the cost accounting
obligation has been set to all of such legal persons, the Undertaking shall implement a common
cost accounting system, eliminating transactions between the legal persons, forming the
Undertaking and the results of such transactions.
59. The Authority, in assessing the data provided by the Undertakings, including the data on
the amount and structure of the costs incurred may use:
59.1. directly obtained data of the cost accounting system of the Undertaking and other
information received when the Undertakings carry out the Rules as well as other requirements
laid down in legal acts;
59.2. other available data on the corresponding costs of services/products, which can be
received by:
59.2.1. comparing prices and costs of corresponding services/products, taking into account
the best practice of the European Union member states, practice of similarly developed
countries and practice of the Republic of Lithuania;
59.2.2. assessing the ratio of wholesale and retail prices and the costs of the corresponding
services/products;
59.2.3. assessing other available information.
60. Undertakings which have violated the requirements laid down in these Rules shall be
responsible in the manner prescribed by the laws of the Republic of Lithuania.
61. Acts or omission of the Authority in implementing these Rules may be appealed against
in the procedure established by the laws of the Republic of Lithuania.
______________________________
 Non-binding translation

Annex 1 to
the Rules for
Cost Accounting
FORM FOR DESCRIPTION OF DEPRECIATION AND AMORTIZATION OF FIXED ASSETS
Residual value at Method of
Identification Date of Expected Residual value at Depreciation
Measurement Number Acquisition Costs of Expected the beginning of depreciation Other
Name of fixed asset number of fixed operation of liquidation the end of (amortization)
unit, unit of units date acquisition lifetime accounting (amortization) information*
asset (code) asset value accounting period in accounting
period calculation
Fixed asset
No. 1
Asset group No. 1

Fixed asset
No. 2
Fixed asset
No. 3
Fixed asset
No. …
Fixed asset
No. 1
Asset group No. 2

Fixed asset
No. 2
Fixed asset
No. 3
Fixed asset
No. …
Fixed asset
No. 1
…

Fixed asset
No. …
Fixed asset
No. 1
Asset group No. n

Fixed asset
No. 2
Fixed asset
No. 3
Fixed asset
No. …
*Note: In undertaking manages cost accounting according to current cost accounting principles and or has revalued fixed assets, it shall additionally provide information about: current (revalued) value of fixed asset at
the beginning and end of the accounting period, depreciation (amortization) of current accounting period from current values of assets and corresponding correcting records for accounting period, which shall show
differences that have formed due to method chosen to value fixed assets. The undertaking may present additional and other information in relation to calculation of depreciation (amortization) costs.
_______________________________________
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Non-binding translation

Annex 1 to
the Rules for
Cost Accounting

FORM FOR REPORT ABOUT TOTAL COSTS OF FINAL PRODUCTS/SERVICES

Total costs Total costs

Volumes of Total revenues
including return Return on including ROI per
services/products Direct costs Indirect costs Common costs Total revenues per unit of a
on investment investment (ROI) unit of a
provided, units service/product
Measure (ROI) services/product
Identificatio
Name of a ment units of
n code of a
service a service,
accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting

accounting
service

Previous

Previous

Previous

Previous

Previous

Previous

Previous

Previous

Previous
Current

Current

Current

Current

Current

Current

Current

Current

Current
unit.
period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period
Service
(product)
No. 1
Business unit No. 1

Service
(product)
No. 2
Service
(product)
No. 3
Service
(product)
No. …
Service
(product)
No. 1
Business unit No. 2

Service
(product)
No. 2
Service
(product)
No. 3
Service
(product)
No. …
 3
Non-binding translation

Service
(product)
No. 1
…

Service
(product)
No. …
Service
(product)
No. 1
Business unit No. n

Service
(product)
No. 2
Service
(product)
No. 3
Service
(product)
No. …

_______________________________