Details This week’s Tuesday and Wednesday, an International Financial Reporting Standards conference “Making the Transition to IFRS” was held in Moscow’s Le Royal Meridien National hotel, organized by IIR Grant Thornton GAAP-online.com , among others.
A truly international affair, it attracted experts from all around the world. Among spokespersons making reports were representatives of world’s leading auditing companies like Deloitte BDO Standard & Poor’s (Svetlana Borodina, “IFRS and Ratings”), Sistema Institute of Internal Auditors Association of Regional Banks of Russia National Organization for Financial Accounting and Reporting
During his presentation “IFRS Reporting for Banks”, Boris Kolmakov pointed out relative weakness of Russian system of banking accountancy. For instance, banks still have to prepare IFRS statements having no official translation of International Financial Reporting Standards into Russian (although unofficial ones do exist). He noted that there long existed translations into, say, German of Dutch, so that European companies can comfortably use them, so why still not in Russian Federation? He then said that it had to be more than a “one-shot” initiative, because IFRS are amended every year – so should be the translations. Absence of “official” IFRS on Russian leads to differences in interpretations, lack of comparability and also – problems with regulatory authorities like the Central Bank.
Despite the progress made with respect to transition to IFRS, there are still too many differences between Russian national accounting standards and the international ones. First, the “principles versus rules” dilemma, where Russian credit organizations (and not only them) are stuck with a huge number of “rules”. Here is an example. Transformation of Russian accounting records into IFRS accounts is considered as the most popular way of preparation of IFRS accounting. So it happened that the Central Bank issued too many transformation blueprints, most of which, according to Boris Kolmakov’s words, seriously lack logical reasoning.
Then, there is such thing as fair value measurements. Although still considered as controversial – for instance, there are big troubles with it on crisis markets, like subprime mortgage markets until recently, for example – this method is already widely employed. But in Russia, there is a very unequal distribution of banks’ capital: about 85% of it is concentrated in 300-400 largest banks, which in turn, are situated mostly in capital region. In all other regions of RF, there is still an ongoing process of formation of market prices and rates – thus, it is hard to use them for fair value valuation.
Finally, there are clearly visible differences between Russian and foreign banks with respect to transparency and financial information disclosure. Credit organizations in RF (and again, not only them) rarely show their accounts to public. Only largest ones do on their official websites – and even then, it is more like separate parts of accounting records, not full version of them. Difference comes from harsh competition, fear of which is stronger than desire to attract new investors (in practice, potential investors, foreign and domestic ones, often receive accounts on individual basis).
Alexander Kurnikov, GAAP-online com
