Financial Reporting In Transition Economies: A Russian Case Study (pp. 77-103)
Authors: Preobragenskaya, Galina G. (Omsk State University, Omsk) McGee, Robert W. (Barry University, Miami Shores, Florida)
Abstract: Corporate financial reporting is getting more complicated with each passing year. More and stricter regulations and laws are being passed and implemented in the United States, the European Union and elsewhere to ensure that corporations issue transparent financial statements that adequately disclose the condition of their business. Transparency and disclosure have become a major focus of good corporate governance. Good financial reporting is even more important in economies that are in the process of converting their economic system from central planning to a market economy because they need good financial reporting practices to attract foreign direct investment. This task is made more difficult because the private sector institutions that have been built up and evolved over several generations in the developed countries were nonexistent in centrally planned economies like the former Soviet Union. Private sector institutions had to be created from scratch in a culture that had no recent history of organizing or operating such institutions. Various international organizations pitched in to assist in creating the private sector accounting, auditing and corporate governance associations that would be needed to successfully convert each country’s financial reporting system into one that resembled the type of system found in the developed economies. This chapter discusses the state of financial reporting in Russia. It is based on a thorough review of the literature as well as interviews conducted with accounting, audit and corporate governance experts in Moscow and Saint Petersburg in the last six months of 2003.