Marriot Aurora Hotel
Conference Results
On 15 June the conference was held in Moscow on Enforcement of Accounting Standards in the context of the Project “Implementation of Accounting Reform in the RF” funded by the European Union. Current issues of Russia’s transition to IFRS were discussed at the conference and the IFRS Survey results on this subject are presented.
Director of the Department of State Financial Control, Auditing and Accounting Regulation of the Ministry of Finance, Leonid Z. Schneidman and Paul Vandoren, Deputy Head of Delegation of the European Commission to Russia, opened the conference. Mr Vandoren commented on the EU’s progress to IFRS and Mr Schneidman presented his views on Accounting Reform in Russia.
The main results of a survey performed within the framework of the Project, reflecting the views of over 2,000 accounting professionals in Russia about International Financial Reporting Standards (IFRS) were presented at the Conference.
Richard Gregson, Project Director noted that:
“The results of the survey above all indicate that Russian accountants support the government’s efforts to develop national accounting standards closer to IFRS in order that accounting practice can match the progress made by the Russian economy.”
Main findings of the survey
- 75% of respondents say accounting reports should reflect economic reality rather than legal formalities
- 66% say that tax accounts should be a subset of financial accounting (not separate)
- 59% say that Russian accounting should be based on IFRS
- 55% say that IFRS should be implemented by 2009 (of those who wish to move to IFRS)
- 74% believe that the Ministry of Finance should be responsible for adopting IFRS in Russia
- 66% believe that the Ministry of Finance should be responsible for enforcing IFRS in Russia
- More than 60% want to increase their professional IFRS knowledge
- Over 80% would like to improve their knowledge of consolidated accounts
- 85% believe that IFRS would help the quality of Russian financial statements
- 61% believe that IFRS should be wholly adopted but modified for Russian specifics.
The survey was carried out by ROMIR Monitoring for the Project.
The full results of this survey are also available online.
The key findings of the conference were presented by the Director of the Department of State Financial Control, Auditing and Accounting Regulation of the Ministry of Finance, Leonid Z. Schneidman and Mr. R. Gregson, Project Director.
Richard Gregson:
“There is no quick, easy method to introduce IFRS into Russia. National specifics must be taken into account.
There are legal obstacles and translation difficulties, as well as divergence in views on both endorsement and enforcement. There is resistance to change and market participants who seek to profit by minimising the transparency of their operations.
Much can be learned from international experience of the introduction of IFRS. The European Union has many parallels with Russian experience of IFRS. For Russia, a gradual introduction to IFRS is required, as full application is not achievable now for all sizes of companies, and possibly never will be.
The Ministry of Finance has noted, with some degree of concern, the implied results from our IFRS survey (www.accountingreform.ru) that the Ministry of Finance alone should be responsible for the development, endorsement and enforcement of IFRS.
Today, we have heard about credibility of external auditors, external quality assurance programmes and public oversight. We have also heard that accounting standards were used more efficiently in the days of the Soviet Union.
We have reviewed the EU model for enforcement, company-level controls, auditors supervisory bodies and government.
Enforcement relies on fair presentation by the management of the enterprises. There is no substitute for the integrity of management.”
Leonid Schneidman:
“This has been one of the first discussions on accounting standards enforcement. The discussion was quite animated.
It is not true that there is no enforcement control in Russia. We have a system, though maybe that system is not fully developed. First of all, we need to identify what should be changed.
The enforcement system is many-sided and it is difficult for us to move simultaneously in different directions. We need to find the main path.
Independent audit is the main route to enforcement. The RF Government made amendments to the Law “On Audit Activity” to unite and consolidate the audit profession and, therefore, ensured that auditors should control enforcement of financial reporting standards.
We should also move forward in other directions such as creating business ethics that would push business community to fight against offenders of recognized financial reporting standards, we also need to enhance the quality of internal control procedures. The Government developed a Concept for making change to the corporate law that is aimed at enhancing internal control procedures.
It is also necessary to introduce penalties system for breaching standards. Such penalties should be significant, not like now.
Outreach activities and education should be promoted among those who are involved in financial disputes resolution, for example judges.
The discussion identified that there is scope for activities and we should pursue relevant course of work which will in future benefit the whole system of accounting and reporting.
