International Financial Reporting Standards ( IFRS ) and their predecessor, International Accounting Standards ( IAS ) is deriving in world-wide acknowledgment. All publically traded companies in the EU must follow them by 2005 and many other states either have adopted them or program to make so in the close hereafter. After interrupt up of Soviet Union, Russia has experienced a batch of convulsion and alterations both political and economical the state has struggled to acquire rid of its socialist yesteryear and it has now evolved to be a more of import spouse in international personal businesss and economic sciences. The demand to develop the modern accounting system has hence been obvious and the state had two picks: to develop its ain system or to follow an bing one, like IFRS.
In 2002, the Russian Prime Minister announced that all Russian companies and Bankss must fix their fiscal statements in conformity with international criterions get downing January 1, 2004. Implementing that determination will non be easy, for a assortment of grounds. Not all international criterions have been translated into Russian. Many Russian comptrollers are non sufficiently familiar with international criterions to implement them. Some Russian universities have merely late started learning international criterions and the go oning instruction plans of the assorted Russian accounting associations are non yet prepared to offer comprehensive classs on international criterions. Current Russian accounting criterions struggle with international criterions in several of import ways and these struggles will non be resolved in the close hereafter.
This undertaking paper considers the issues that arise when implementing new accounting ordinances, some of which are non new and have been covered in the literature, but others of which are peculiar to the execution of IFRS coverage. Te method of execution, the range of IFRS, peculiar issues with local accounting pattern and IFRS, the issues of enforcement of conformity with IFRS and its relationship with audit, the nexus between IFRS coverage and revenue enhancement and the proviso of instruction and preparation are all considered. There is besides reappraisal of the province of readiness of local group listed entities with regard to the execution of IFRS coverage.
There are many research countries for accounting research where the work could besides inform the pattern of IFRS accounting. The paper provides a part by foregrounding how one state has moved to implement the demand for group listed endeavors to fix IFRS histories and the issues that so originate for legislators, preparers and users.
Introduction of the survey
Background of the survey
Globalization is doing a dramatic impact on the universe economic system, boundary lines are acquiring less and less relevant and corporation and trade between companies situated on different continents is now really common. More and more companies have become planetary in their commercial activities and international trade with portions and credits is invariably increasing. As companies and capital demands have left the national degree, capital internalisation has become a necessity. The demand for an unfastened fiscal market is now stronger than of all time. Globalization makes comparison and harmonisation of the accounting and fiscal coverage top precedence.
The end of the EU is to make a free market where capital labour, goods and services are to travel freely. With the common currency, the European market has become more crystalline for companies and it has made it easier to analyse concern chances within the EU. The execution of International Accounting Standards ( IAS ) and the International fiscal Coverage Standards ( IFRS ) will further better the transparence of companies ‘ information and besides be an of import measure in the EU ‘s committedness for a common European capital market. For investors and loaners it is of import to hold comparable and choice information and this can merely be achieved if states cooperate in making a common system like IAS/IFRS.
After the dissolution of the Soviet Union in 1992, Russia had to alter its economic system from a planned economic system to a market economic system. In a commend economic system the agency of production are in public ownership, the province dominates the economic system, and economic system activity is supposed to react to province way. By contrast, in a market economic system the agencies of the agencies of production are chiefly in private ownership, the province creates the legal model in which economic activity takes topographic point, and economic topographic point supposed to react to market forces. Such a passage evidently has of import effects for accounting, which ceases to be an instrument of the province economic disposal and alternatively becomes an instrument at the disposal of the concern community.
New types of companies and endeavors urgently needed new accounting criterions. In a market economic system the aim of companies ‘ fiscal coverage is to give utile information to show and possible investors, creditors and other interested parties to ease their determinations. Though until now the function and the fiscal coverage still remains the State, in the individual of the revenue enhancement governments. Nevertheless, voices of the other involvement parties – investors, creditors, directors and besides comptrollers and hearers – go more and more of import. In that manner, the Russian accounting and fiscal coverage develop, nearing international criterions.
As passage economic systems go through the procedure of casting their centrally planned accounting theoretical account and replacing it with a market oriented theoretical account that uses international criterions they face a figure of jobs. Very few people know the new regulations, since the international criterions must foremost be translated into their linguistic communication. Accountants who can read the international criterions promulgated by the International Accounting Standards Board and its predecessor, the International Accounting Standards Committee in the original English have a competitory advantage in this respect, but seeking to to the full work this advantage may be thwarting if possible clients or employers do non put much value on international criterions. There is besides an inactiveness barrier to get the better of. It is hard to alter the position quo ( Friedman & A ; Friedman 1984 ) . Accountants and directors who have been utilizing the old system for 20 or 30 old ages do non desire to alter because they feel comfy with the system they learned in school or on the occupation when they were immature. Those persons besides happen to be the people who are now in charge of endeavors and accounting sections, so their blessing must be had before any new system can be adopted and implemented.
2.1.1. International Standards in Russia
As we know from our old readings, accounting is portion of the legislative system. That is a job because Russia will ne’er hold true international criterions if authorities has to pass it. There will ever be a slowdown and manner and linguistic communication jobs. The original program by the Russian Finance Ministry in 1998 was to follow all IAS by 2000. That did non go on. The new mark for full acceptance and execution is 2004, at least in the instance of Bankss and publically traded companies. However, that mark is besides improbable to be met. In fact, non a individual comptroller interviewed thought that international criterions would be to the full adopted and implemented by 2004. One comptroller estimated that full execution would take ten old ages ( RobertW. & A ; Galina G. , 2004 )
In the instance of the criterion on damage, many Russian companies and their comptrollers do non desire to use the damage regulations because many companies have assets that are overvalued. Using the impairment criterion would do the plus side of the balance sheet to shrivel, well in many instances, and they do non desire that to go on. In utmost instances, a company that appears healthy could look to be insolvent if the damage regulations were applied. This hesitance is non alone to Russia. The same state of affairs exists in Republika Srpska, the Serbian portion of Bosnia, and in other once centrally planned economic systems.
Possibly the chief ground why the criterion on fiscal instruments has non been adopted is deficiency of demand. Very few Russian endeavors use complex fiscal instruments, and the 1s that do are already using the IAS or U.S. GAAP on this subject. Besides, this criterion is hard to understand and many Russian comptrollers are non eager to do the attempt to larn a criterion that they likely will non utilize in the foreseeable hereafter.
Another point that could be made about Russia ‘s acceptance of international criterions is that even the criterions that have been adopted may non ever be international criterions. For illustration, the Russian criterion on income revenue enhancements is based on the old version of the IAS income revenue enhancement criterion, non the new 1. This fact is known within much of the Russian accounting community but may non be every bit good known outside of Russia. Another, less good known fact about Russia ‘s accounting criterions is that the Russian versions of the criterions that have been adopted are non mere interlingual renditions of the English linguistic communication masters. In many instances they are abbreviated, simplified versions of the original English linguistic communication IAS. RAS tend to be much shorter, more elaborate and conceptual. They cover a fraction of the content of IAS. In short, it may non be accurate to province that Russia has adopted IAS. It would be more descriptive to state that Russian accounting criterions are simply based on IAS. Often the differences between RAS and IAS are non big or of import. However, the difference may be significant, such as in the country of accumulations rules.
Another ground why RAS will ne’er be indistinguishable to the international criterions is because there is a clocking slowdown between the clip a new international criterion is issued in the UK and the clip that new criterion is translated into Russian and adopted as portion of the Russian accounting regulations. This slowdown could be overcome if the Russian Duma made it a regulation that all new international accounting criterions will automatically and instantly become portion of the Russian regulations. However, the Duma will ne’er do such a regulation, for grounds of national pride and sovereignty. So the slowdown will be lasting, even though there is a theoretical solution that would rectify this slowdown.
The grade to which the Russian accounting community understands the international criterions depends on several factors. The Russian interlingual rendition of the original English version of the criterions was non available until late 1998. The interlingual rendition was second-rate, in some respects.
Part of the job was because there were no Russian footings to convey some of the constructs. In other instances, the Russian transcribers merely used the incorrect word or said things in such a manner as to do the sentence or phrase unintelligible. In at least one instance, the transcriber left out the word “ non, ” with the consequence that the Russian version of the criterion instructed the reader to make something, when in fact the English version of the regulation said non to make something. These sorts of errors and imperfectnesss are to be expected the first clip a proficient papers is translated, particularly in instances where no footings exist for some of the words and thoughts that need to be translated.
The Russian comptrollers who can non read English are limited to reading the Russian interlingual rendition of the international criterions. That places them at a competitory disadvantage, for the grounds mentioned above. The Russian interlingual rendition is mediocre in some topographic points and in other topographic points is downright incorrect. The Russian speech production comptroller has no manner of cognizing how accurate the reading of a peculiar sentence or paragraph might be, but must trust on what is written because there is no other option. Russian comptrollers who were educated in a university that did non learn the international criterions have a job reading the international criterions in any linguistic communication because the criterions contain constructs that the Russian comptroller was ne’er exposed to during the old ages at the university. Such comptrollers must larn the new regulations as best they can, either by self-study or by go toing some talks or seminars on the assorted subjects.
Another ground why the comptrollers in the outlying parts are non as knowing about international criterions as are the large metropolis comptrollers is due to differences in demand. Most clients that need statements prepared harmonizing to international criterions are in Moscow or St. Petersburg. A few large endeavors are scattered around other parts of Russia, largely in the bigger metropoliss. The comptrollers who service smaller clients have small or no demand to cognize the international criterions, so they do non take the clip to larn them. The consequence is a two-tier system where the comptrollers and the employees who work for their clients in Moscow or St. Petersburg know at least something about international criterions, whereas their opposite numbers in the outlying parts know less, or possibly nil about international criterions.
2.1.2. Developing Russian Accounting Standards ( RAS ) and Establishing IFRS in Russia
As Valeria Petrovets ( 2006 ) mentioned in his survey, during the first period after interrupt up Soviet Union, non much happened with the accounting system as the authorities was occupied with other, more of import, issues. From 1993, the balance sheet, and from 1996, all fiscal studies were made in net figures harmonizing to international pattern. In 1994 the Ministry of Finance approved the first accounting criterion and marked the beginning of new Russian Accounting Standards ( RAS ) . The Federal Law “ On Accounting ” was issued at the terminal of 1996. A new free market economic system demanded farther alterations in the Russian accounting system and in March 1997 an order for an accounting reform plan was signed by Yeltsin. One of the of import parts of the plan was the development of RAS in conformity with IAS ( Yegorov, L. , 2002 ) .
Until twelvemonth 2006, it had been of work in passage to IFRS: there were 22 new accounting criterions approved ( which were written on IFRS footing ) , the Institute of Professional Accountants and the fund “ National Organization for Accounting and Financial Reporting ” were founded, a figure of legal codifications in this country were approved and the first functionary IFRS Russian interlingual rendition was made.
Until 2004, utilizing the IFRS was voluntary. Subsequent reformation of the national accounting leads to legislated ordinance of the fiscal coverage harmonizing to the IFRS. At the terminal of 2003 the Central Bank issued a directing which obliges all Bankss to stand for their amalgamate fiscal statements for 2004 harmonizing to IFRS. At the first phase the statement harmonizing to IFRS should be represent to the Central Bank together with Russian fiscal coverage. In 2007, a complete bank system passage to IFRS and forsaking of the national criterions is planned.
In ( 2004 ) the Ministry of the Finance of the Russian Federation approved “ The Conceptual for accounting and finance coverage development in the Russian Federation on medium-term position ” , which defines the chief waies of dealing to finance describing harmonizing to the IFRS for Russian companies. The Concept raises the inquiry of the necessity for the legislated blessing of the IFRS. It is supposed that amalgamate histories, made harmonizing to the IFRS, will acquire the legislated position. The Conception provides two phases in the dealing:
I stage: 2004-2007
Compulsory passage to IFRS of amalgamate histories for companies of major national involvement, except for those companies listed on other stock exchanges and which prepare their fiscal studies harmonizing to other international criterions ( for illustration, US GAAP ) .
Blessing of the Russian fiscal coverage criterions for legal individuals, prepared on the footing of the IFRS.
II phase: 2008-2010
Compulsory passage to the IFRS of amalgamate histories for the other companies, including companies, listed on other stock exchanges and which prepare their fiscal studies harmonizing to other international criterions.
2.1.3. National Accounting Differences
In presentation, acknowledgment, and measuring
In perceptual experience, and reading
Different accounting rules
Different aims of fiscal coverage
Country-specific societal, economic, and cultural environment
Figure ( 1 ) : Reasons for International Accounting Problems
Accounting differences between different states depend on what aim the state has with the fiscal coverage – if the information is intended chiefly for present and possible investors or for revenue enhancement governments and creditors. Interested parties of a company ‘s one-year study are besides employees, providers, clients and other organisations. With the aid of fiscal statements, users receive information that they need and companies are ready to show.
The different intents of fiscal coverage are chiefly influenced by economic, societal and cultural factors. One of the of import cultural variables is the agencies used for fiscal coverage ordinance: “ because of this, if alteration is triggered in two states at the same clip by the same event, the agencies chosen for regulation may be different. ” In add-on, different states have different attitudes about how the statute laws are followed.
It is believed that cultural differences affect accounting. However, it can be hard to use them to the measuring of accounting differences. More direct links can be established between accounting, legal and accounting systems.
Accounting rules are formed in conformity with the intent a company has with its fiscal coverage and that can be important for the manner in which balance and income statements are formulated. The differences in accounting rules can besides take to indistinguishable or similar operations and minutess being evaluated and accounted otherwise, therefore demoing a different one-year net income.
Motivation of the survey
The chief intent of my survey is to look into how the procedure of IFRS acceptance for the national accounting system develops in Russia. And besides, there is some extra intents that I am traveling to analyze are to demo how Russia works with the reformation of its accounting system, how the historic and economic development affected accounting and fiscal coverage. Equally good as to specify obstructions and jobs which the state in general, and separate companies, in peculiar, have come across in connexion with IFRS execution.
The undertaking paper is written with the purpose to lend to the image of international harmonisation of fiscal coverage and how far Russia has advanced for IFRS execution. This survey might be interesting for those who are interested in international inquiries and international accounting.
Aims of the survey
The aim of this survey is to happen out what jobs do Russian non – banking companies have in connexion with IFRS execution. And besides to find how the state ‘s historical and cultural background affects their dealing to IFRS.
Literature of the survey
As it has been known from old surveies, so many research workers have been written about International Accounting Standards ( IAS ) , International Standards on Auditing ( ISA ) , accounting harmonisation, accounting instruction and accounting reform in passage economic systems in recent old ages. A few books and articles have focused on accounting reform in Russia.
An early survey by Mills and Brown ( 1966 ) discussed how switching from a production theoretical account to a profitableness accounting theoretical account would assist Soviet endeavor directors make determinations that would increase the efficiency of their houses and assist them to break allocate resources. In a similar vena, Thornton ( 1983 ) discussed alterations in the manner the Soviets accounted for factor costs over a 25 twelvemonth period. A survey by Scott ( 1969 ) stated that Soviet accounting after the 1965 reforms started to put more accent on endeavor profitableness, which helped travel the Soviet economic system closer to a Western market theoretical account.
Other writers have besides touched on this subject. Horwitz ( 1970 ) discussed the consequence that decentalisation has on the direction accounting control system. Chastain ( 1982 ) described how the Soviet accounting system was non able to maintain up with the demands of endeavor directors. He besides assesses the deductions of that inability for the accounting profession.
Turk and Garrod ( 1996 ) discussed the lessons Slovenia learned when it began the procedure of altering to International Accounting Standards. The Slovenian experience is non unlike the Russian experience in many ways. Preobragenskaya and McGee did research on the relationship between IAS and foreign direct investing ( FDI ) in Russia ( 2003a ) and on the province of scrutinizing in Russia ( 2003b ) . Their FDI survey concluded that the deficiency of credibleness of Russian fiscal statements was haltering influxs of foreign capital. Their audit survey found that the province of scrutinizing in Russia is non yet up to western criterions.
A few surveies have been made on accounting instruction in Eastern Europe or the former Soviet Union. Harmonizing to one bookman, Houghton Mifflin ‘s 1300-page Principles of Accounting was the first Western accounting text sold in the Soviet Union ( Collingwood 1991 ) . It was translated and distributed by Finansy I Statistika, Moscow ‘s authorities owned publishing house. Kobrack and Feldman ( 1991 ) speculated whether the reform procedure in the Soviet economic system could make a new market for accounting text editions. McGee has written about educating accounting professors in Bosnia & A ; Herzegovina ( 2003a ) and reforming accounting instruction in Armenia ( 2003b ) .
There are several beginnings of information on recent developments in accounting reform in Russia. The International Center for Accounting Reform in Moscow [ www.icar.ru/ ] publishes the ICAR Newsletter. The World Bank publishes Transition Newsletter, which gives current information about assorted facets of market reforms in passage economic systems, including accounting reform in Russia. The Russian web sites of the Big-Four accounting houses besides have current information and, in some instances, publications.
The Deloitte & A ; Touche Russian web site has an e-library nexus that contains a assortment of points on assorted facets of making concern in Russia. It has a Doing Business in Russia Online Guide, which includes much information on accounting and revenue enhancement subjects. It has several newssheets that address accounting, revenue enhancement and legislative issues on assorted states, including Russia. Russia – Legislative News is a monthly newssheet that contains accounting and revenue enhancement points. Legislative Tracking is a day-to-day publication that keeps readers abreast of Russian pending statute law.
Ernst & A ; Young publishes An EYe on Russia, a monthly newssheet on current concern, accounting and revenue enhancement issues. It besides has a Russian Legislation web site that contains downloadable paperss on Russian accounting, revenue enhancement and related statute law that have been translated into English.
There are assorted strands in the literature on international accounting harmonisation which cover such countries as: the grades of harmonisation ( Tay and Parker, 1990 ; Emenyonu and Gray, 1996 ; Murphy, 2000 ) , whether international accounting harmonisation is appropriate ( Hove, 1986 ; Cairns, 1997: Flower, 1997 ) and the grade of conformity with IFRS ( Cairns, 2001 ; Street and Gray, 2001 ) . Most of the relevancy of this survey on the execution of IFRS would look to be the research on the rightness of IFRS for developing or transitional economic systems, the practical deductions of implementing IFRS within a state located in the Continental European tradition of accounting and research on the alterations to national accounting in transitional economic systems.
In his 1998 survey, based on a reappraisal of the literature on accounting and developing states, Nobes noted assorted points about the rightness of IFRS for developing states. Nobes talked about developing states but Russia is a developed state and at the same clip supports on developing. He suggested that given the likely users of most enterprise fiscal statements in developing states were the revenue enhancement governments and proprietors and loaners to private endeavors, following IFRS in developing states, where IFRS are stated to be investor oriented ( IASB, 2003 ; F9 ) , may non be appropriate. In peculiar many of the ulterior IAS ( IAS 22-38 ) might non be relevant for showing accounting information for revenue enhancement intents. Nobes besides suggested that, given the deficiency of a developed accounting profession to construe and use the more judgmental facets of IFRS ( either as hearers or comptrollers ) , there could besides be issues of the dependability of accounting information. Though he provided illustrations, he did non do explicit that this could be a peculiar issue for any accounting information based to a big extent on market informations such as just value ( Nobes, 1998a ) . Further research on transitional economic systems has indicated structural issues with a deficiency of active stock markets, and corruptness, which may impact the dependability of IFRS fiscal statements and appraisals of just values ( EBRD, 2000 ; Sucher and Bychkova, 2001 ) .
However, much alteration has been province sponsored, instead than self-generated, and the Ministry of Finance has continued to play a cardinal function ( Seal et al. , 1995 ) . This may therefore indicate that alteration may be really slow. Garrod and McLeay ( 1996 ) besides highlighted how authoritiess have adapted the old collectivist accounting systems to run into the envisaged demands of new users every bit good as province demands for revenue enhancement aggregation and dealt with the general issues of conflicting aims for fiscal coverage. They comment on the jobs of set uping the right balance between province and professional engagement in the ordinance of accounting and the troubles that have arisen in rating of assets, in the absence of to the full working markets, and the range of fiscal statements ( Garrod and McLeay, 1996 ) .
In much of the old research there has been an accent on the de jure state of affairs with accounting alteration in Central Europe, and less focal point on the de facto state of affairs which might be rather different ( as suggested by Bailey, 1995 ) . There is a demand for farther research on the existent operation of fiscal coverage within endeavors to guarantee that any execution procedure wages due respect to the de facto state of affairs instead than simply the de jure state of affairs. There has besides been a inclination in the academic research to analyze single states as comprising enterprises all with similar fiscal coverage aims.
However, within a state there are different groups of endeavors with different describing aims depending on their size, support and ownership construction. Indeed, some writers have suggested that, within the categorization literature, there may be different ‘types ‘ of accounting systems in operation in any one state ( Nobes, 1998b ) . This could be taken farther to propose that there are different groups of professional hearers and comptrollers trained under different describing systems ( e.g. some hearers trained under an international system of tests in accounting ; some under a local scrutiny system ) . Any research on the alterations to national accounting should reflect this diverseness of demands and resources.
The Big Four audit houses have played a big function in the move to IFRS around the universe, as they are frequently the hearers of IFRS statements and they have the big resources needed to keep appropriate cognition and expertness in IFRS.
There has been comparatively small research on their function in transitional economic systems ( though Seal et Army Intelligence, 1995, and Sucher and Alexander, 2002, are exclusions and some concerns about their functions are raised in some of the World Bank studies ) . Some consideration demands to be given to their function in the move to IFRS within the transitional economic systems.
The literature suggests that there may be contextual factors which affect the rightness and effectivity of the execution of IFRS in a transitional economic system such as the Russian Federation. These factors may be divided into the place of the Ministry of Finance in originating and implementing reform ; the function of the peculiar users of fiscal statements, and the relationship between fiscal coverage and revenue enhancement which in bend may associate to the national tradition in accounting ( Anglo Saxon versus Continental European ) . Then it is suggested that there are specific factors which may impact the effectivity of and the ability to implement IFRS: differences between local and IFRS accounting criterions, peculiar issues with single IFRS and the dependability and handiness of market informations for just values, and the attack to implementing conformity, with peculiar respect to the function of hearers. There may besides he extra factors refering how the IFRS are translated and the extent of instruction and preparation in IFRS.
Summarize, critically rating of the articles, decision and suggestions
From the above literature reviews we can sum up the followerss. In order to measure a survey, a thorough analysis of the beginnings is in topographic point. As earlier described, most of the written beginnings were used for theoretical background. The writers and their books are well-known and widely used for societal surveies similar to this survey. The newer written beginnings that have been taken from the Internet have come from magazines, newspapers and portals associated with accounting issues and were chosen out of a greater choice.
Accounting is one of the domains that has been transformed since the beginning of the
1990s. Its reformation and supervising have been executed by assorted governmental organic structures, although considerable resources from international organisations have besides been attracted to the procedure. The acceptance of national criterions based on IFRS was chosen as the vehicle for alteration. But alteration occurs easy and the state is immense.
There is a slowdown between the clip criterions are adopted and the clip they are implemented. Some of the grounds are the deficiency of demand for choice information, largely from inside users of fiscal information, and the outlook and instruction degree of the bulk of comptrollers and pedagogues in accounting. This state of affairs may be apprehensible for a state that is in passage and that existed in the absence of freedom and market relationships for many decennaries. From the writers ‘ point of position, from the options under consideration, the preferable option toward the passage to IFRS is to do it mandatory to supply IFRS statements for companies that are in the zone of public involvement. It is non necessary to hold Russian Financial Statements for such companies. For other companies it can be left up to them which regulations, if any, to utilize for their fiscal statements. There are several jobs with coercing IFRS down the pharynxs of any section of the accounting and fiscal community. One structural job is the trouble of harmonising the legislative subdivision so that the assorted participants are on the same field. There is a deficiency of coordination between or among the assorted parties. There is a serious deficiency of high quality advisers on IFRS execution. All these factors do non assist in the passage to IFRS. If Russia is to win in transforming its economic system into something where markets dominate, it will hold to get the better of these barriers. But force is non required. Markets are the absence of force. Markets are merely voluntary exchange. Markets develop of course when no 1 prevents anyone else from merchandising what he has for what he wants. It seems unlogical to utilize force to implement markets. There is some grounds that the market for fiscal information is at work in Russia.
The fact that the Russian authorities has done a less than first-class occupation of assisting in the transmutation procedure to some signifier of internationally recognized accounting criterions has non prevented market forces from work outing the job. Practically every major Russian company now prepares fiscal statements based either on IFRS or US GAAP. No 1 forced them to make it. They did it voluntarily so that they could pull foreign capital. Although there is a serious deficiency of expertness in this country, the Big-Four accounting houses rushed in to make full the market demand. The market solved the job. Much remains to be done, but what is being done is being done by the market. If the authorities has any function to play, possibly it is to acquire out of the manner and allow the market operate. Companies that do non necessitate foreign capital should non be forced to fix fiscal statements that have no value for them, particularly if it costs them resources to make so. If IFRS statements have value other than to pull foreign capital, the more intelligent Russian enterprisers and directors will get down utilizing IFRS. The less perceptive enterprisers and directors will pay a monetary value if they fail to utilize up-to-date accounting techniques and tools, merely like the less perceptive concern people have to pay a monetary value, in footings of lost net incomes and lost chances, in every other country of concern when they fail to utilize the best tools. IFRS is truly merely a tool. Companies should be free to utilize it if they think they can profit from utilizing it, and they should be free non to utilize it if they see no benefit in utilizing it.
Methodology of the survey
The last chapter has reviewed the anterior surveies that the jobs during execution of International Financial Reporting criterions in Russia. This chapter presents a theoretical model to find the relationship between acceptance of IFRS in as a dependant variable and independent variables. Last hypothesis will be developed.
As pointed out in the debut and literature reappraisal subdivisions, the purpose of this survey are to depict the experience Russian companies have had with debut of IFRS. The day of the month was collected from old surveies as a secondary information. As IFRS in Russia is still really new, small has been written on the topic. This undertaking paper will measure up as descriptive research since the end is to depict an issue instead than to understand or construe it. Furthermore, it is besides exploratory or job – identifying research and may, on history of its comparative freshness, do a good footing for farther surveies in the same field subsequently on.
Russia has changed it society, political and economic construction more in these last 15 old ages than many other states do in hundred old ages. The system of today is a synthesis of the state ‘s history, and is a blend of old socialist bequest, early post-Soviet epoch and contemporary society. This is besides reflected in Russian concern life where different subdivisions of the same company can work under wholly different premises.
Until late, subtracting the cost of an IAS audit was non allowed by the Russian revenue enhancement codification ( Ermakova 2003 ) , which took some of the inducement off from holding such an audit. Russian comptrollers and hearers are non sufficiently good versed in international criterions to implement them, with a few exclusions. There is a widespread perceptual experience on the portion of comptrollers who work for the big international accounting houses that none of the Russian accounting houses, even the biggest 1s, are able to supply high quality service sing international criterions. The big international accounting houses, largely the Big-Four, have rushed in to make full the spread to supply the services and expertness that the local Russian houses can non supply. This capturing of market portion by the large houses has caused some bitterness on the portion of the smaller Russian houses. It has besides given some Russian accounting houses an lower status composite, since they know they do non hold the resources or expertness to vie against the international houses. Russian accounting houses have lost some big clients to the Big-Four. However, some of their large clients subsequently returned, partially because of cost considerations.
There is besides the perceptual experience that international criterions are non needed, either because the RAS are merely every bit good as the international criterions or because there is no demand for international criterions. There is a grain of truth to the deficiency of demand statement. Until a few old ages ago, the lone ground most houses prepared fiscal statements was to supply information to the revenue enhancement governments. Some houses still prepare fiscal statements merely for the revenue enhancement governments.
From the undermentioned theoretical model you can see the dependent variables and independent variables of this survey. This model shows the job of the survey and the factors that affect to this job. And besides it shows the negatively relationship between dependant variable and independent variables.
Lack of DemandIndependent Variables ( IV ) Dependent variables ( DV )
Necessity of Legislative Changes
Execution of IFRS in Russian Federation
The Level of Economic Development
Lack of Accounting Professionals
Translation Difficulties of IFRS
Lack of Advisers
Figure ( 2 ) : Research Model
Measurement of Variables
Lack of Demand: One of the most basic Torahs of economic science is the jurisprudence of supply and demand. If something is demanded, person will provide it. One job with doing the passage from PBU to IFRS is that many comptrollers and concerns do non see the demand for IFRS. Financial information produced utilizing IFRS is a merchandise but the utility of the merchandise is non ever readily evident. A great trade of clip and attempt has to be expended to convert unwilling consumers of fiscal information that the merchandise has some value.
The most legion possible users of fiscal information are company direction. The figure of companies that need fiscal information for determination devising intents far exceeds the figure of companies that need fiscal information to pull external capital. But the public-service corporation of the information has yet to be realized and that is one ground why the demand for it has non increased.
One solution is to advance or publicize the benefits of holding good fiscal information. It is necessary to supply comprehendible statements on the advantages of holding IFRS fiscal information to concern proprietors and their comptrollers. As more companies adopt IFRS and get down to see the benefits, word will distribute and an increasing figure of companies will finally follow IFRS.
Necessity of Legislative Changes: Another job that must be overcome in the alteration from Russian accounting criterions to IFRS has to make with legislative alterations. Significant alterations will hold to be made to bing statute law to consequence the alteration. Not merely accounting but besides revenue enhancement and civil Torahs will hold to be changed. At present, the definitions, footings and constructs used have little differences in significance, depending on which legislative act is being examined. Sometimes a term or construct is non defined at all. For illustration, the term “ market value ” is used in accounting statute law [ PBU 19/02, 5/01, 16/02, 6/01, 12/2000, 9/99 ] . The term “ market monetary value ” is used in Civil Law [ Civil Code, portion 1, 2 ] . Tax statute law [ Tax Code ] uses footings like “ market value ” and “ market monetary value. ” But the definition for market monetary value is given merely in the Tax Code.
The IFRS system will work decently merely if it is coupled with subdivisions from other subdivisions of jurisprudence. But for this to go on it will be necessary to follow subdivisions that Russian jurisprudence shapers can alter. To farther complicate affairs, the definitions for IFRS footings that are issued out of London are frequently different than the definitions that exist in Russian statute law. Intelligibly, the people who draft the linguistic communication of the IFRS definitions and footings in London does non first consult with the Russian Civil Code before publishing their dictums. But this causes a job because the definitions for certain footings are different and the Duma is excessively busy working on more of import affairs to make anything about it.
Administrative Aspects: The procedure of presenting IFRS into Russian pattern is non helped by the fact that several different sections and ministries are involved in the procedure. Besides, there is small coordination in their actions. The Finance Ministry, the MEDT and the Central Bank are all involved, as are the people who regulate the securities markets. Representatives from the accounting profession, nevertheless, are non involved in the procedure, which consequences in skewing the consequences, possibly in the incorrect way.
The Level of Economic Development: One statement rather frequently used by oppositions of the debut of IFRS into Russia is the statement that the economic construction does non let the debut of many instruments or constructs, such as just value or discounted value. M. Makarevich is one of import observer who expresses such an sentiment. The fact that the Russian economic system has non reached the point where it is possible to name it developed is another job. But to abandon efforts to travel frontward merely because non all the rocks have been cleared away would be a error. The fact that companies that produce IFRS and US GAAP statements find solutions to the assorted jobs they encounter shows that solutions exist.
Lack of Accounting Professionals: There is a serious deficiency of comptrollers who know the regulations and use them. As was mentioned, there are grounds why Russian comptrollers do non follow the regulations. Part of it has to make with non cognizing what the new regulations are. Part of the job is that they are unaccustomed to exerting professional judgement. The outlook of the whole Russian accounting profession has to alter before major alterations can be made to the system. A whole new coevals of comptrollers has to be grown and educated before the leftovers of the Old Russian outlook disappear and acquire replaced with a new manner of looking at accounting jobs and their solution.
Lack of Advisers: The deficiency of advisers is a direct consequence of the deficiency of bing demand for IFRS. At present merely the Big-Four accounting houses and a smattering of Russian houses are able to supply high quality confer withing on IFRS. The capableness of Russian advisers is restricted by their entree to English linguistic communication information. The Big-Four houses do non hold this job because they merely hire comptrollers who have a good appreciation of the English linguistic communication. Therefore, they are able to read the IFRS in the original English and do non hold to depend on interlingual renditions which, historically, have been less than perfect at best. Because of this structural advantage, the demand for services from the Big-Four is so high that they sometimes have to take part in the readying of IFRS fiscal statement, and so scrutinize those same statements.
The Problems of Russian Translation of IFRS: Presents, everyone admits the necessity of a legislated acceptance of IFRS for Russian fortunes. The construct of IFRS in the normative system of the Russian Federation is planned. However, it is clear that execution of IFRS crucially depends upon the handiness of a high quality important interlingual rendition into the Russian linguistic communication. At present it is one of the most complicated and emotionally charged inquiries. Its complexness is determined by a figure of different factors. The official text of the international criterions is drawn up and distribute in English. Until late all interlingual rendition in other linguistic communications were published by the International Accounting Standards Board or under states, whereas in Russian the inquiry of important interlingual rendition is still non solved ( Valeria Petrovets, 2006 ) .
Another facet of the interlingual rendition job is that the criterions are non something lasting ; they change and updated continuously. Does it intend that for every new version of IFRS a new right of first publication should be bought? Actually there are two versions of the International Financial Reporting Standards: one issued by IASB ( the complete version ) and the other used within EU ( with some exclusions ) . The EU ‘s ordinance are free beginnings and one can utilize them freely without transgressing anybody right of first publication, but one must pay for the usage of IASB ‘s IFRS version.
Decisions and suggestions
Russian has changed its society, political and economic construction more in these last 15 old ages than many other states do in a hundred old ages. The system of today is a synthesis of state ‘s history and, and is blend of old socialist bequest, early station – Soviet epoch and modern twenty-four hours society. This is besides reflected in Russian concern life where different subdivisions of the same company can work under wholly different premises. A parent company based in Moscow can hold a batch of international spouses and non differ a batch from similar companies in the West, while regional subdivision can hold really disused equipment and might be wholly unprepared for any international contracts. This disagreement is a serious drawback as it is impossible to present IFRS without modern computing machines and concern systems package throughout the company.
This leads us to the 2nd and likely most of import subject. In order O cut down dependable studies, the people involved, both hearers and economic experts, need to hold proper instruction. There is Russian IFRS interlingual rendition but legal jobs about the right of first publication of the interlingual rendition have slowed down the procedure of distributing it. While companies in many other states around the universe can utilize English as their 2nd ( or foremost ) linguistic communication of concern, this is non the instance in Russia. Even extremely educated and component professionals frequently have virtually no cognition of English and this excludes the possibility to utilize the original English version for most companies. The topic of proper instruction can non be emphasized plenty. If economic experts have better accomplishments so statements even made harmonizing to the transmutation method can demo more dependable figures.
Russian has modernized its ain accounting system ( RAS ) which is based on IFRS, although there are many differences between the two criterions. Russian has two picks: either to follow IFRS as its ain criterion or go on to develop RAS, which today is based on but less elaborate than IFRS. Russian companies are likely to choose for IFRS, but it is impressed from magazines and old surveies that RAS will be the ruling accounting criterions in the hereafter, particularly if the difference about the Russian interlingual rendition of IFRS is non for good solved in the close hereafter. Since Russia in non a member of IASB they do non hold any influence on the hereafter development of IFRS and inquiries related to them, and a fright of losing political control might besides travel Russia towards the 2nd pick.