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THEORETICAL AND METHODOLOGICAL STUDY OF THE MODERN STATE OF ACCOUNTING ANALYTICAL SUPPORT OF MANAGEMENT OF BUSINESS ENTITIES IN RUSSIA
Khakhonova N.N.
Doctor of economic sciences, professor of department of Accounting
Rostov State University of Economics
ABSTRACT
The dynamism of information economy, integration processes related to the appearance of the world market of capital, harmonization and convergence of accounting systems inevitably conduce to the establishment of a new accounting paradigm. The problems, appearing in the process of globalization of economies of different countries, raise the requirements to information, which reflects the financial situation and financial results of the economic activity of a corporation. The significance of the information function of reporting, which supports effective competition at the capital market, is increasing. Accounting information turns into a production factor rationalizing the capital usage. The necessity to consider the issues of formation of accounting analytical support of business entities management within the system approach and analysis determined the relevance of the chosen subject.
Keywords: internal accounting, management accounting, accounting systems, accounting and analytical information
The official interpretation of the notion of information environment is stated in the Conception of formation and development of integrated information environment in Russia and corresponding state information resources, which was elaborated in 1995 in pursuance of the Decree of the President of the Russian Federation No.1390 dated July 01, 1994 'On the improvement of information telecommunications support of public authorities and the procedure of their interaction when executing the public policy in the sphere of information technologies' [1]. In the given conception, the integrated information environment is presented as a system of banks and data bases, technologies of their maintenance and application, information telecommunications systems, which function on the basis of common principles and provide:
- information interaction between business entities and employees;
- satisfaction of their information needs.
The integrated information environment of any business entity in Russia is composed of the following main components:
- information resources containing data, information and knowledge recorded on the corresponding information storage media;
- organizational structures providing functioning and development of the integrated information environment, in particular, collection, processing, storage, dissemination, search and transmission of information;
- means of information interaction between employees and business entities, which provide access to information resources on the basis of corresponding information technologies, including hardware and software and organizational regulatory documents.
The term 'integrated information environment' is used to denote such a procedure of information presentation and storage and access to it that any data available in a company may be obtained on a request in various sections and combinations.
It is obvious that if a company has several information systems and several types of information presentation (electronic and printed documents), the task of developing the integrated information environment in this company becomes not only complicated and labor-consuming, but also costly. Therefore, if the company management makes a decision to develop the integrated information environment in the company, the first step to fulfill this task is to determine which information types should be available within this environment, and which ones should stay 'beyond the framework' and be available from independently functioning systems. Therefore, it is significant to develop effective information systems, which include a total of software, hardware, labor resources supplying the concerned users with necessary information.
The term 'information system' (IS) is used in economic literature both in wide and narrow senses.
In wide sense, an information system is a total of hardware, software and organizational support as well
as personnel, designed to supply proper people with proper information in due time.
Likewise in wide sense, the notion of information system is interpreted by the Federal Law of the Russian Federation No.149-®3 dated July 27, 2006 'On information, information technologies and information security': 'an information system is a total of information contained in data bases, and of information technologies and hardware, which provide its procession [2].
Standard ISO/IEC 2382-1 gives the following definition: 'An information system is a system of information processing, which works together with organizational resources such as people, hardware and financial resources to provide and distribute information'
[3].
Information systems in narrow sense are considered as a hardware-software system designed for automation of the purposeful activity of end users, which provides a possibility of data accessing, modification and storage in accordance with the set processing logic.
In this study we adhere to the opinion that an information system (IS) is an interconnected total of means, methods and personnel used for information storage, processing and release with the purpose to achieve the stated objective.
Information systems are distinguished by the following:
- recurrence of processing related to peculiarities of accounting. Accounting information undergoes equal processing in the same time periods by changes of content and figures;
- difficulties of calculations (an average number of arithmetic, logic and other operations for one form of factor).
In any case the main task of the current information systems is to meet particular information needs within the framework of a particular subject field. Ideally, integrated information environment should function in a company and meet all existent information needs of all employees, services and departments. However, practically, the formation of such overall information environment is complicated, due to this usually several various IS function in a company and solve
separate groups of tasks: production management, financial and economic activity, etc.
In our opinion the most successful solution is an independent access to specialized information systems (e.g.: legal system) and paper archives. In this case, the integrated information environment includes the systems, which provide exhaustive information concerning the internal environment of a company in any form necessary for analysis of the company activity and preparation of management decisions. As a rule, they are accounting systems, although in some companies they are supplemented with systems of electronic documents circulation (which should be correctly defined as systems of computer supported cooperative work with documents) and systems for customer relationship management (or CRM-systems). Organization of a shared use of several information systems for formation of the integrated information environment presents a complicated methodological and technical task.
A typical example of the integrated information environment in a small company is the usage of several simple specialized accounting systems - bookkeeping, warehouse and customer data bases. In practice the task to integrate several specialized accounting systems into one integrated information environment in the part of determination of that what kind of data should be accumulated in the central information system is related to the company management approach to formation of the integrated information environment.
As a rule, an accounting system is understood as a complex task-oriented science with its wide and narrow scientific methods reflecting the multilevel economic system, which possesses the following essential elements: accounted, formed and perceived information; accounting procedures (basic and subsidiary accounting processes, methods of information search, collection, storage, processing, supplying and dissemination and means of implementation of such processes and methods); regulatory legal and organizational support; accounting personnel; necessary infrastructure.
It is possible to separate the following groups of methodological principles oriented at the formation of an effective accounting system in business entities (table 1.1).
Table 1.1.
Fundamental principles of organization and functioning of an accounting system of a company [4].
Principle Description
Principles of organization
Integrity Support of interaction with other types of accounting
System Meeting the requirements related to the registration of a wide complex of accounting events in all spheres of the company activity
Sequence Support of sequence combined with operational, operating and strategic accounting information, their inseparable interconnection and interdependence in the time horizon of planning and accounting
Succession It forms a methodic basis for functioning of the financial and management accounting
Coordination It supports the interaction between subsystems of the financial and management accounting and management of a company both horizontally and vertically and supports time synchronization
Comparability Establishment of conditions for comparison and correlation of quantitative values of accounting data according to the reflected characteristics, units of measurement, level of recurrence, and value of an accounting event
Legitimacy Conformity to the legislation in force, regulations of company standards, instructions and methods of the accounting process
Progressiveness Makes an accounting system correspond to progressive foreign and domestic analogs
Transparency It presupposes that an accounting system should possess a unified accessible terminology and function according to unified principles (assumptions and requirements) and methods
Security It determines the security level of accounting information and the procedure of access to it
Computerization It presupposes the organization of automated working places in an accounting system and application of modern information technologies
Principles of purpose
Adaptability It supports adaptability of a system to the changing strategic and operating purposes of a company, external and internal conditions of its activity
Continuity Maintenance of an information base in accordance with the requirements determined by managers
Flexibility Reflection of changes in the external and internal environment. Conformity of organizational and computer equipment to the software, modern achievements of information technologies and means of communication
Precision Support of the agreed precision
Operability Fulfillment of requirements concerning the operating registration of the already occurred important and other events, economic processes and operations
Principles of efficiency
Minimization Support of an efficient scheme of organization and functioning, when the cost level of the given processes should tend to minimum, but not to the detriment of tasks performed
Reliability Fulfillment of control requirements
Economy It implies a more efficient and economic organization of an accounting system, lowering of costs on its functioning in the overall expenses of a company
Optimality It implements multi-variant development of organization schemes of an accounting system and a choice of a more efficient one for the concrete conditions of a company
For accounting in the management system to fulfill its multipurpose function in the company management it is necessary for it to be implemented on the basis of scientifically grounded methods. The application of these or those methods depends on a level of management development in a company, scope of production, functional profile of accounting events, application of organizational and technical means in an accounting process, requirements of the integrated
automated information system to the accounting information.
In order to obtain the information required for the production and economic activity management, a company creates a bookkeeping accounting information system (BAIS) on the basis of modern information technologies.
In the bookkeeping accounting information system the data about economic activities of a company
are collected and registered in primary documents, the data are processed and accumulated, financial and economic indicators of reports are formed, and information is transmitted to users for analysis and decision-making.
The main task of BAIS functioning in a company is to provide the company management with financial information for well-grounded decision-making when choosing alternative variants of limited resources use.
An integration of different types of accounting (operating, bookkeeping and statistic accounting) takes place in BAIS on the basis of unified source information. But there is no fusion of these types of accounting because each of them has its functions and solves its tasks.
Speaking of formation of the integrated information environment of a company in the interpretation which we have given above, i.e. the integrated information environment of accounting data about the company activity, it is logical to suppose that its formation starts with the determination of accounting policy of a company. Accounting policy of a company is understood not as an accounting document, which should be in any company according to the requirements of the current legislation, but as general strategic tendencies of how accounting is performed in a company: what, how, in what forms and with what type of recurrence is accounted. Besides, accounting is understood both as bookkeeping and management accounting.
As a matter of fact, when we talk about an accounting policy of a company, we mean the system of planning and control of its activity for the purpose of management.
In our opinion, the integrated information environment has the following distinctive features and advantages:
integrability — supports interaction of existing systems with newly joining systems, components and subsystems;
usability — supports the possibility to fulfill the functions set in every system;
validity — allows getting well-grounded results in the course of software application;
reactivity — defines the possibility of a system to react to internal and external influence;
security — defines the possibility to prevent system destruction as a result of an unauthorized access, etc.
In our view, the integrated information environment of an economic entity is a basis of the management system, this environment constantly changes, new information flows appear, which are conditioned by wide implementation of computer aids and widening of production and financial relations of a company. The functional purpose and type of the information system depend on that element the interests of which and on what level it serves.
The formation of the integrated information environment may conduce to the following:
- more rational variants of management task solving by means of implementation of mathematical methods and intellectual systems, etc.;
- disposal of routine work due to its automation;
- support of reliability of information;
- improvement of the information flow structure and documents circulation system in a company;
- reduction of costs in a company, etc.
Thus, under modern conditions the information environment for management decision-making by managers of a company is formed on the basis of data of different types of accounting. These types are bookkeeping, management accounting, strategic accounting, production accounting, tax accounting, production operative accounting, etc. All these accounting types differ from each other but they are often united and form symbiosis of elements of operative accounting, budgeting, calculating, 'standard cost', 'direct cost', etc. and it is dictated by users' demands for decision-making. Choosing an accounting type for management functions implementation depends on the strategy of business development, its current tasks and peculiarities of its activity.
Any information system within the existing integrated information environment of business entities of Russia is based on the relevant information support, which presents a complicated dynamic complex process meeting the information needs of management and performs the functions of rationalization of activities of its apparatus.
A system of information support is a total of implemented decisions concerning the scope, placement and forms of information organization. It includes six interconnected information subsystems: planning, organization, accounting, control, analysis and regulation. This system is to bridge information gaps in strategic, current and operational business management and to secure a unified contour of regulation of its activity [5].
In our view, one of the components of information support is the accounting analytical support. The system of bookkeeping unites accounting and analytical operations in one process. At the same time we observe improvement of both general methodology and regulations of accounting and analysis for reasonable usage in the integrated accounting analytical system. Continuity of this process and application of its results in a company are necessary for management decision-making.
Presently, a whole range of terms, which were not used before, were introduced in the theory of accounting and practical activity. As it is truly noted by Professor A.N. Khorin: '.. .a necessity has grown for the scientific community, legislative authorities and departments, which are to carry out methodological guidance in the sphere of accounting, to elaborate conceptual and categorial framework for this sphere and to regulate its usage in all spheres of practical work'[6].
In the course of study, we found out that there is a big diversity of terms used in theory and practice and similar in their content to the term of accounting analytical support. In our study we systematized the terms and grounded the reasonability of usage of the term 'accounting analytical support - AAS'.
Let us consider in details the existent approaches and points of view on this issue.
I.V. Alekseeva interprets accounting analytical support as a total of accounting information and analytical data obtained on its basis, which conduce to tactical and strategic decision-making [7].
It is necessary to underline that all accounting analytical support is carried out according to a number of principles, which make it a sufficiently effective instrument of financial management:
- principle of system approach;
- principle of complexity;
- principle of account of specific features.
The principle of system approach to the formation of accounting analytical support of management orients to consider the object of the financial economic activity as a system, it requires the disclosure of object integrity and revealing diverse types of connections in it and their integration into a single theoretical picture.
The system approach presupposes to consider accounting as a system of interconnected elements; it is implemented in the following actions and manifestations: system determination by means of establishment of its structural components which influence the set objectives; system organization to achieve the objective with optimal means; understanding of interconnection between elements of the system; continuous improvement of the system on the basis of its evaluation and assessment; setting of priorities of resource agreement.
The principle of complexity for the formation of accounting analytical support of management presupposes that a complete information base of business management is created, which allows assessing the power of managing influence on one section or the whole company.
The principle of account of specific features claims the necessity to form an individual system of accounting analytical support in every company under the influence of the whole range of internal and external factors.
The paramount component of accounting analytical support is accounting support, and the activity analysis and internal control are built on its basis.
O.A. Rybalko and T.G. Sheshukova are convinced that a total of accounting elements and connections between them, formed to achieve the objective of meeting information needs of users, makes the basis of the accounting system. [8].
It is possible to single out in the system of accounting support the accounted, formed and perceived information; accounting procedures (main and subsidiary accounting processes, methods of information search, collection, storage, processing, supplying and distribution and means of implementing these processes and methods); analytical procedures (comparison with regulatory, planning documents and in dynamics, factor analysis of prime cost, balance method, expert method), regulatory legal and organizational support; accounting personnel; required infrastructure.
Thus, development of accounting support of management implies improvement of methodology of accounting, which is inseparably connected with an evolution process of accounting.
If accounting supplies information, then analysis gives a form to it suitable for decision-making. Analysis as a management function includes the assessment of internal and external factors of the situation, general tendencies of the development of economic processes, possible reserves of the production efficiency increase.
When organizing a continuous analysis, its opera-bility and effectiveness increase because the analysis directly follows the accounting and is carried out in the course of economic financial accounting. Meanwhile, the subsystem of analytical support of the economic activity management turns into a constantly functioning factor of the production efficiency increase due to activation of the whole information fund of a company.
It is necessary to maintain the integrity of analysis on the assumption of decentralized processing of information, i.e. to unite the process of information processing with the process of decision-making. Such interpretation of the purpose of accounting and analysis is important and achievable. At that, not only end results will be assessed but also the course of economic activity, which at the stage of planning is considered as a total of technological, technical, organizational and management preparation and service of a production process in industrial enterprises [9].
All accounting processes as well as system elements defining the quality of functioning of an accounting analytical system (methodology, organization, technology) shall be harmoniously integrated in the unified economic information field, which is a system of a higher level for accounting.
The significance of a continuous accounting and analysis for economic processes is closely connected with a possibility of influencing them by means of making necessary management decisions in the operational mode.
The modern conception of AAS provides for accounting, analysis and control of not only internal economic operations in business processes but also the analysis of parameters of external macro environment. AAS should reflect both direct and feedback relations allowing to adapt information to the changing requirements of internal and external users of information.
Working continuously the accounting analytical support increases the quality and broadens the field of practical application of accounting information, in the end effect positively influencing the quality of the prepared and presented reporting and reporting indices themselves, i.e. the effectiveness of accounting information for third-party users.
The development of accounting analytical support of management shall be considered in the context of dialectical laws (law of unity and conflict of opposites, law of transformation of quantitative changes into qualitative changes, and law of negation).
Thus, the main objective of the accounting analytical support in any company, formed in the course of accounting organization, is the support of effectiveness of accounting and control system functioning in a company, provision of the highest rank management of a company with reliable data for effective and reasonable decision-making.
The globalization of economic processes, dynamism of the world financial market, mobility of goods, capitals and labor force, an increasing share of intellectual labor, transformation of production conditions, implementation of the newest technologies directly influence the conceptions constituting the grounds of the theory of accounting and reporting formation, in particular support of new accounting objects, as well as the methods of registration and reflection of the economic activity. The role of modern objects is performed by intellectual property, which is registered in legal institutions and has a conventional commodity form through possession of rights and is not subject to alienation in full accordance with market laws because one alienates not the results of creative activity, but the rights on their usage.
The intensive development of transnational corporations and world financial markets puts forward accounting information as an object, the fast transmission of which speeds up business transactions, changes technologies of accounting and presentation of corporate reporting. Information economy brings in changes into methods of reporting presentation by a group of companies. Primary documents are replaced by electronic ones, the formats of which are developed by corporations independently taking into account necessary details, the content and purpose of accounts change allowing to form a network or matrix accounting model. The problems of depreciation of assets, their permanent revaluation, etc. changed considerably.
The harmonization of accounting at the world level constantly encounters a diversity of traditions and tendencies of the accounting and reporting development in different countries. There is no doubt that accounting and reporting are products of socio-economic conditions and, therefore, it is important for every country to have a system of definite standards compatible with the environment, where they are used.
Even for one and the same company the reporting, made according to standards of different countries, will differently evaluate the activity results and business financial state.
By the beginning of the twentieth century the prerequisites for problem solving of incomparability of reporting data had been formed. They include: economic integration; strengthening of the role of multinational corporations (MNC); corporate internationalization; development of the international financial market; formation of the international capital market; international statistics.
On the assumption of the general task of the quality improvement of the integrated accounting information environment, the recent decade has strongly stated the problem of intensification of the role of the accounting information generation system in quality improvement of the perceived accounting environment and effectiveness increase of interaction between the formed and the perceived environments.
The single objective of the accounting information generation system consists in formation and provision with high quality information of all environments.
The structure of the information, formed in the generation system, may be presented in the following way:
- external: reflecting the reality and managing information;
- internal: reflecting the reality; managing and output information.
The peculiarity of such system is availability of many subjects for one object. The relations between them may be called formalized relations, because users give their conventional and objective interpretation of information content of financial reporting presented in the form of sufficiently formalized flow.
Thus, the mechanism of information transformation and the objective of the accounting information generation system condition the system structure, information structure, processes of its generation, methods and technologies of processing, and, in its turn, the structure of the generation system is characterized by the availability of an object, subjects, direct and feedback relations between them.
In the course of international coordination of accounting there have been elaborated three main approaches to solving the problem of unification of accounting: harmonization, standardization and convergence.
The idea of harmonization of different systems of accounting is realized within the European Community (EC). The point is that every country can have its own model of organization of accounting and its own system of standards regulating it. The main idea is that these standards shall not contradict the analogous standards in the countries-members of the community, i.e. they shall be in a relative 'harmony' with each other. In order to form the conception of accounting development in the countries of EC, a research group was organized to study accounting problems. The results of this work were published as regulatory documents, which were included by every EC-member in its national law in the part dedicated to accounting.
The idea of standardization of accounting procedures is realized within the framework of unification of accounting performed by the International Accounting Standards Committee (IASC), which develops and publishes international financial reporting standards (IFRS). The essence of this approach consists in the development of a unified set of standards which may be applied to any situation in any country; due to this the necessity of elaboration of national standards stands no longer.
The idea of convergence is a gradual (permanent) approaching of national standards of accounting and reporting to international financial reporting standards. It is attained by means of organization of joint sittings of the International Accounting Standards Board (IASB, Great Britain) and Federal Accounting Standards Board (FASB, the USA), and by means of elaboration of unified standards by these bodies.
Thus, we should acknowledge that the role of international financial reporting standards is increasing year after year in the whole world. It can be explained by the fact that international financial reporting stand-
ards (IFRS) are the rules setting the requirements to acknowledgment, assessment and disclosure of financial and economic operations for making financial reporting in the whole world.
At present, IFRS are more often understood as new standards - IFRS developed on the basis of the course taken by IASB in force for convergence of IFRS and US GAAP (Generally Accepted Accounting Principles of the USA). The convergence of the accounting systems is attained by means of holding of joint sittings of the International Accounting Standards Board (IASB, Great Britain) and Financial Accounting Standards Board (FASB, USA), as well as by means of elaboration of unified standards by these bodies.
Already in 1990s in the West the notion 'IFRC for organizations and institutions of the state sector (IFRS SS)' appeared along with the notion 'IFRS', they are elaborated and approved for this sector by the International Federation of Accountants, and not by IASC. Besides, recently IFRS for small and medium business appeared. As a typical business for IFRS for small and medium business implementation, IASC considered as a guideline a business with 50 workers.
One more new notion 'reporting adequate (equal) to IFRS' appeared in 2007. The matter is that in 2007 the USA did not transfer to the application of IFRS, as it was supposed, and in practice they employed national standards - GAAP (Generally Accepted Accounting Principles) at the same time using some particular regulations of IFRS. Lately there has been a considerable speeding-up of convergence processes between GAAP and IFRS. As a result, a whole range of new International Financial Reporting Standards (IFRS) elaborated on their basis appeared [10].
It may seem strange, but instead of the generally promoted approach of US GAAP to IFRS, in practice right the opposite takes place: IFRS approaches US GAAP more often. The strong influence of the USA is conditioned by its representation in the fund under IASB which is responsible for financing and strategic development of IASB, and votes for the appointment of each of 14 members of IASB, and the members of IASB develop new standards. [11].
The modern system of IFRS is not ideal. It is proved by the results of many researches, including those carried out by the Institute of Chartered Accountants in England and Wales on the request of the European Committee. This Institute carried out researches in the countries of the European Union in order to find out the public opinion concerning the first results of transfer of the listing companies of the European Union from the year 2005 to the obligatory preparation of their consolidated financial reporting in accordance with IFRS. As a result, it was determined that every fifth of the interviewed investors (24%) thought that the transfer to IFRS did not improve, but, on the contrary, deteriorated the quality of reporting. Every second investor (49%), in addition, mentioned that the implementation of IFRS complicated the understanding of financial reporting. First of all, it is related to financial instruments, deferred taxes, business combination, etc [12].
However, the correlation of national standards and IFRS is different in different countries:
- in many developed countries national standards are as much as possible close to the international ones (Great Britain, the Netherlands, the USA, France, Switzerland, Sweden, etc);
- some countries use IFRS as national standards (Cyprus, Kuwait, Latvia, Malaysia, Pakistan, etc);
- some countries use IFRS as a basis for the development of their national standards (China, Russia, a number of countries of the CIS, Singapore, etc).
The reform of the accounting in Russia started with the determination of new objectives and tasks of accounting.
In the middle of the 90s of the last century Russia started to take an active part in the process of international economic integration and formation of the market infrastructure. It made it possible for Russian companies and organizations to take part in: foreign economic activity of the country and, consequently, payments in foreign currencies; joint activities; operations of acquisition and disposal of property in trust management and operational management, etc.
Under these conditions of formation and development of the market economy, operations with securities and intangible assets became widespread. The foreign capital inflow to Russia, emergence of a large number of foreign companies and their representatives, branches and subsidiaries conditioned the necessity to study the international rules not only of 'business' management, but also of legal, customs and accounting closure of deals. The economic reform in our country could not but affected the accounting system - a powerful information system providing the management bodies of a company with the information necessary for making management decisions and their implementation.
A unique accounting system which totally corresponded to the requirements was established in Russia. Under the conditions of planned economy and centralized management the national system of accounting with the following distinguishing features was formed:
- governmental control over accounting in the country by means of adoption of regulatory documents obligatory for employment;
- full standardization and unification of accounting procedures and accounting documents;
- integrated system of accounting reporting.
The main objective of accounting was safekeeping
and rational use of the state property.
During all years of the socialist economy in the country the accounting was constantly developing and improving in an 'evolutional' way: its new forms were elaborated and implemented, the cards of accounts were reviewed and corrected, the forms of accounting were changed, mechanization and automation of accounting were introduced.
Though, in spite of obvious advantages of this accounting system, under new economic conditions the old system was doomed. With the beginning of restructuring of the Russian economy it was needed already not to improve this system of accounting, but to update it on the new methodological basis - IFRS.
In 1998 the government of the Russian Federation took the decisions related to the reformation of accounting in accordance with the international financial reporting standards (decree No. 283 dated March 6, 1998, orders No. 382-p and No. 587-p dated March 21, 1998 and May 22, 1998). The most important constituent of the reform was improvement of accounting in business entities (decree of the government of the Russian Federation No. 1373 dated October 30, 1997).
The main objective of the accounting reformation was to bring the national accounting system to conformity with the principal tendencies of the international financial reporting standards harmonization.
The intensive and long-lasting work aimed at formation, discussion and adoption by the decree of the government of the Russian Federation No. 283 dated March 6, 1998 resulted in the adoption of the Program of accounting reformation according to IFRS. It was stated that the changes taking place in the course of economic reforms in the Russian Federation required the adequate transformation of accounting. Therefore, in accordance with the Program, the objective of the accounting system reformation was to bring the national accounting system to conformity with the requirements of the market economy and IFRS, and the tasks of the reform were the following:
- to form the system of standards of accounting and reporting providing users (first of all, investors) with useful information;
- to secure reconciliation between the accounting reform in Russia and main tendencies of standards harmonization on the international level;
- to render the methodic assistance to organizations in comprehension and implementation of the reformed accounting model.
The question of importance was what to take as a basis when reorganizing accounting - accounting rules of some particular country or IFRS. After debating it was acknowledged that implementation of IFRS in the Russian accounting system was conditioned by:
1) transformation of the Russian economy into an integrated constituent of the world economic system (macroeconomic aim at attracting foreign investments, entry of Russian business entities into the world capital markets, joint business of Russian and foreign organizations);
2) opportunity to use the already accumulated world experience of standards elaboration, which are accepted by public authorities or professional organizations regulating national accounting rules in the majority of countries, in order to make an effectively functioning system, which meets the needs of the market economy, in the shortest time possible.
IFRS were not initially designed to regulate accounting and reporting in separate countries, or to be directly employed in practice. The objective of their elaboration was to unify national accounting and reporting systems in order to improve the quality of the financial reporting presented by business entities, first of all, by transnational corporations.
Hence, it was found to be reasonable to use IFRS:
1) when developing a conception of accounting in the market economy of Russia in order to ensure the
comparability of accounting information formed by Russian and western companies;
2) when developing national accounting standards as a model and criterion of conformity to the internationally accepted practice.
As the world practice demonstrates, the transfer to IFRS employment is a gradual and purposeful process. The impossibility of a fast transfer is conditioned by the necessity to implement a wide range of activities, in particular, corrections in the civil law and preferably in the tax law, as well as to review a normative basis of accounting.
The Conception of accounting in the market economy of Russia approved by the Methodological Council for Accounting under the Ministry of Finance of the Russian Federation and President's Council of the Institute of Chartered Accountants on December 29, 1997 determined the main tendencies of accounting reformation implying a more active application of IFRS.
It was expected that implementation of IFRS would make it possible to eliminate gradually the drawbacks and lack of correspondence of the national accounting system to the requirements of the market economy without breaking the integrity of this system. Besides, the application of IFRS by means of employment of integrated accounting methods for the economic activity management should have increased the company transparence and strengthened the system of corporate culture, which would have improved the business climate in the country and strengthened the confidence of businessmen.
Throughout a whole number of years, the Russian accounting community has been debating the transfer to IFRS and the role of self-regulating organizations in the process of approval of financial reporting standards.
Some accountants complained and even refused to discuss the possibility of IFRS application in Russia, paying their attention to tax reporting. Some authors insisted on the gradual approach to IFRS through the gradual updating of the system of national standards -Accounting Regulations. Other accounting specialists considered the gradual reformation of the national accounting to be unpromising and suggested to start using the universally recognized international standards -IFRS.
The long discussion of IFRS applicability in Russia was conditioned by both objective and subjective reasons existing in Russia in the end of the XXth century. Among the objective reasons one can single out the insufficient development of corporate relations and property management, no demand for public financial reporting, considerable influence of the soviet school of accounting, condition of scientific researches in this area. Among the subjective reasons it is possible to separate the insufficient qualification of accounting personnel, incomprehension and, consequently, non-use of many accounting regulations in practice, outdated methods of accounting which are practically not updated, no subdivision into financial and management accounting in methodology and in practice.
The underdevelopment of corporate relations manifested itself in the insignificant representation of capital stock at stock exchanges, in the overall merge
of owners and stock company managers in one person, in the stock buyup from minority shareholders outside of the organized trade markets and gradual, almost complete exclusion of minority shareholders, in the lack of the mechanism of attraction of small owners to stock companies and in weak legal protection of property. All of these affected the demand for public accounting in corporate activity and, consequently, the inattention to accounting and audit of accounting. Many transactions between shareholders were carried out irrespectively of the content and credibility of reporting. The quality of accounting information did not influence the corporate relations, which considerably affected the characteristics of accounting regardless of the most advanced regulations on it.
Thus, there are three opinions concerning the application of the international standards in accounting:
1) to recommend the complete and entire application of the international standards in accounting in Russia;
2) to refuse the application of the international standards and to develop the own Russian national standards;
3) to develop the Russian standards by means of adaptation of the international standards to the national accounting requirements.
To our view, the last opinion is the most proper because, first of all, it is necessary to take into account the national traditions and the accumulated positive experience of Russia in accounting; secondly, at present we experience an active process of revision and updating of IFRS. Under these conditions the way of convergence of the accounting regulations to 'new' IFRS is considered to be the most reasonable.
To make the transfer of the Russian business entities to IFRS successful, it was necessary:
- to improve the norms of the tax law;
- to allow organizations to present their tax statements, reports and accounts on the basis of the reliable analytical accounting;
- to lift unreasonable tax sanctions for divergence in accounting when no violations and mistakes in tax reporting were identified;
- to annul or to collate some normative regulations on the initial documenting of separate economic facts;
- to allow organizations to start using the advanced chart of accounts of the European type, which ensures the disclosure of all necessary information required for reporting according to IFRS;
- to enable business entities to keep the accountancy on the basis of their adopted accounting policy, entirely corresponding to the requirements of IFRS. Thereat they should not be obliged to keep their accountancy in parallel in accordance with the Russian accounting regulations;
- to provide training for skilled specialists in application of IFRS [13].
In July 2004 the Ministry of Finance of Russia elaborated the Conception of Accounting and Reporting in the Russian Federation for a mid-term prospect, according to which the objective of the accounting and reporting development for a mid-term prospect (2004 -2010) was the formation of acceptable conditions and
prerequisites for successive and successful execution of the economic functions inherent in the system of accounting and reporting.
The formation of the conceptual framework of IFRS adaption in our country (considering the introduction of updating in the Conception itself and the Plan of its implementation) is a constantly operating process controlled, on the one hand, by the bodies of executive and representative power and professional community, on the other hand. Only such approach will make the adaptation and implementation of IFRS in Russia successive and irreversible.
Presently the basic documents regulating the transfer to IFRS in Russia are the following:
1. Federal Law No. 208-®3 dated 27.07.2010 'On consolidated financial reporting' [14]. It specified the basic requirements and regulations of transfer to international standards.
2. Federal Law No. 402-®3 dated 06.12.2011 'On accounting'[15]. It introduces the international financial reporting standards into the legal framework of the Russian accounting as the basis for the further development of accounting in Russia.
3. Decree of the Government of the Russian Federation No. 107 dated 25.02.2011 'On approval of Regulations on acknowledgement of the International Financial Reporting Standards and Interpretation of the International Financial Reporting Standards for application on the territory of the Russian Federation' (amended on 27.01.2016) [16]. It determined the mechanism of acknowledgement and acceptance of the international standards in the Russian Federation.
4. Order of the Ministry of Finance of Russia No. 160h dated 25.11.2011 'On implementation of the International Financial Reporting Standards and Interpretation of the International Financial Reporting Standards on the territory of the Russian Federation'[17]. It fully implements IFRS and interpretations to them in force on 01.01.2011 from the day of their issue in the official edition.
5. Order of the Ministry of Finance of Russia No. 106h dated 18.07.2012 'On implementation and cancellation of the documents of the International Financial Reporting Standards on the territory of the Russian Federation' [18].
On the basis of the provisions of the above-named regulations it follows that the necessary condition for a wide application of IFRS in the economy of Russia is the development of the infrastructure securing the application of these standards in accounting regulation and directly by business entities.
The main elements of the infrastructure of IFRS application in the economy of Russia are as follows:
1. legislative acknowledgement of IFRS in the Russian Federation;
2. procedure of IFRS approval;
3. mechanism of generalization and distribution of the experience in application of IFRS;
4. procedure of official translation of IFRS into the Russian language;
5. quality control of reporting prepared according to IFRS, including audit;
6. IFRS training.
The acknowledgement of the documents of international standards in Russia is understood as the process of decision-making on implementation of every document of international standards on the territory of the Russian Federation, which consists of succession of the following operations:
a) official receipt of the document of international standards from the Foundation;
b) applicability analysis of the document of international standards on the territory of the Russian Federation;
c) decision-making on the implementation of the document of international standards on the territory of the Russian Federation;
d) publication of the document of international standards.
The capacity of the expert body was accredited to the Foundation of the non-profit organization 'National Organization of Financial Accounting and Reporting Standards (NOFRS)', it was reported in the message of the special Committee of the Ministry of Finance of Russia of 08.07.2011.
The approved document of international standards takes the effect on the territory of the Russian Federation in successive steps, unless otherwise provided in this document. In the first stage the approved document of international standards takes the effect on the territory of the Russian Federation for voluntary application by organizations for a period specified in this document, but not until it is officially published. In the second stage the approved document of international standards takes the effect on the territory of the Russian Federation for obligatory application by organizations for a period specified in this document.
If a period and/or order of its coming into effect are not specified in the document or it is approved for application on the territory of the Russian Federation after the period specified in it, then such a document takes the effect on the territory of the Russian Federation from the day of its official publication.
The objective of the acknowledgement procedure of each IFRS (including interpretations) is to include them in the system of regulatory legal acts of the Russian Federation. It is comprised of the professional social assessment and implementation of each standard.
The decision on the implementation of the document of international standards on the territory of the Russian Federation is taken by the Ministry of Finance of the Russian Federation by agreement with the Federal Financial Markets Service and Central Bank of the Russian Federation on the basis of the resolution of the expert body.
The official text of IFRS in the Russian language shall be used on the territory of the Russian Federation. The texts of IFRS were registered in the Ministry of Justice of Russia on 05.12.2011 and published in the appendix to the journal 'Accounting' No. 12, 2011, which was assigned by the Order of the Ministry of Finance of the Russian Federation No. 156h dated 22.11.2011 to be the official periodical for publishing of Standards and Interpretations.
For the purpose of generalization of the application practice of IFRS in Russia and in accordance with
the Regulation on the Ministry of Finance of the Russian Federation approved by the Decree of the Government of the Russian Federation No. 329 dated June 30, 2004, in 2012 the Interdepartmental working group for application of IFRS was formed.
In compliance with the Regulation on the Interdepartmental working group for application of IFRS approved by the Order of the Ministry of Finance of the Russian Federation No. 148 dated 30.03.2012, the Interdepartmental working group has the following basic functions:
1) study, analysis and generalization of the application practice of the Federal law 'On consolidated financial reporting' and other regulatory legal acts on the issues of application of IFRS on the territory of the Russian Federation;
2) analysis of the public policy implementation in the field of IFRS application on the territory of the Russian Federation;
3) identification of problems, which appear in the course of IFRS application on the territory of the Russian Federation and require solutions;
4) preparation of recommendations on the problems appearing in the course of application of IFRS on the territory of the Russian Federation;
5) generalization and distribution of the application experience of IFRS with the purpose of their successive and unified application;
6) coordination of work of federal executive authorities, other bodies and organizations represented in the Group to secure the participation of the Russian Federation in the activity of the International Financial Reporting Standards Foundation.
The basis of the control system should be the institute of audit as an independent control unit of accounting of business entities by individuals possessing necessary skills and accredited with corresponding authorities. In this respect the institute of audit becomes one of the main instruments of the accounting and reporting development. Likewise, it is necessary to implement the control over the preparation and execution of reporting as per IFRS. Here the main part is performed by supervisory bodies - Central Bank of the Russian Federation or Federal agency for insurance supervision for credit or insurance companies respectively or Federal Financial Markets Service for all other public companies.
The development of accounting and reporting is impossible without the improvement of accounting education. The task is in training of a sufficient number of skilled accountants and auditors, who understand conceptions and particular rules of information formation in accounting and reporting and have modern skills of accounting, preparation and audit of reporting as per IFRS.
Many Russian companies already now prepare financial reporting on their own in accordance with the requirements of the Russian law as well as in accordance with the international standards. [19].
According to the results of the research made from May to April of the year 2011 by 'Baker Tilly Rusaudit' together with Hock training there was an increase of the
number of companies using IFRS, but it was characteristic for financial and oil companies oriented at the external markets [19]. Presently the overwhelming majority of large companies (with proceeds exceeding 15 billions rubles) prepares reporting in compliance with IFRS, which is in demand by both shareholders and banks. The majority of companies with middle- and small-capitalization also prepare their reporting according to IFRS, and their number is constantly growing and has reached 75%. [20].
To summarize the above-stated, it should be acknowledged that the result of the work on convergence of accounting on the international level is a process of formation of the International accounting system which is based on general accounting principles and generates integrated financial accounting and reporting standards for comparability of the activity of companies of all countries in the world.
The improvement of national accounting systems on the basis of convergence will make it possible to bring together the dynamic characteristics of the activity, taking less economically developed countries to the level of the more developed ones. The information obtained in the harmonized accounting systems and possessing equal qualitative characteristics will generate objective conditions for speeding-up positive processes and business development in the region in general.
The globalization of the economic life, manifesting itself in development, expansion, intensification of the world production, global market, growth of significance of the information factor, increase of mobility of the spare capital, conditions the necessity to determine the place of national accounting systems in the global information complex. In the given context, it is important for particular countries, especially in the period of developing economy, to solve the problems of transfer to IFRS or maintenance of national accounting and reporting systems, determination of economic effectiveness and cover of expenditures on implementation of IFRS, provision of economic security of the country during the transfer to international accounting norms, etc., which have not been sufficiently studied in the accounting literature. Therefore, developments on the above-mentioned problems are considerably topical, and attempts to solve them will allow predicting the development of the integrated international system of accounting indices formation in the future.
References
1. The concept of formation and development of a common information space of Russia and the corresponding state information resources, approved by the RF President's decision of 23.11.1995 № Pr-1694.
2. Federal Law of the Russian Federation No.149-®3 dated July 27, 2006 'On information, information technologies and information security'
3. Standard ISO 2382-1:1993. URL: http://www.morepc.ru/ informatisation/iso2381 -1.html.
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5. Khakhonova N.N. Methodological aspects of the accounting-analytical provision of cash management / N.N. Khakhonova, S.V. Ukolova. - Rostov-n/D: RSUE (RINH): AzovPechat', 2013. - 220p.
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12. Krylova T.B. The first results of implementation of IFRS abroad / T.B. Krylova // International accounting. - 2008. - № 3. - pp. 64-69.
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14. Federal Law № 208-®3 dated 27.07.2010 'On consolidated financial reporting'.
15. Federal Law № 402-®3 dated 06.12.2011 'On accounting'
16. Decree of the Government of the Russian Federation № 107 dated 25.02.2011 'On approval of Regulations on acknowledgement of the International Financial Reporting Standards and Interpretation of the International Financial Reporting Standards for application on the territory of the Russian Federation'
17. Order of the Ministry of Finance of Russia № 160h dated 25.11.2011 'On implementation of the International Financial Reporting Standards and Interpretation of the International Financial Reporting Standards on the territory of the Russian Federation'
18. Order of the Ministry of Finance of Russia № 106h dated 18.07.2012 'On implementation and cancellation of the documents of the International Financial Reporting Standards on the territory of the Russian Federation'
19. Belskikh I.E. On the issue of application of IFRS, US GAAP and Russian Standards of Accounting in financial reporting of Russian large business entities / I.E. Belskikh // International accounting. - 2011. - № 2. - pp. 2 - 5.
20. Mamina M.T. International unification of accounting as a factor of development of business environment / M.T. Mamina // International accounting. -2011. - №. 15. - pp. 37-41.
