engleski

The Impact of the national accounting standards for SME's on financial reporting in former transition countries in comparison with Croatia

Small and medium-sized enterprises and unlisted companies have special requirements which need to be considered. It is necessary for accounting and auditing regulators to be both independent and accountable. The implementation of international standards needs to take into account all of the forces affecting corporate behaviour and all of the layers of the corporate reporting process. The process as a whole needs to contribute to wealth creation. The arguments in favour of international standards convergence (i.e. the benefits to companies and investors of lowering the costs of cross-border transactions) apply equally to monitoring and enforcement activities. Indeed, it could be argued that much of the effort devoted to international standards convergence will be wasteful if there are inconsistent or duplicative national approaches to monitoring and enforcement. Inconsistency will constrain the improvements in investor confidence ; duplication will increase costs for both companies and investors. The benefits from co-operation amongst national regulators are already well-understood in the banking, securities and insurance markets. There are well-established international organizations at the global and European levels which make it easier for the national authorities to co-operate and to adopt common approaches. It is reasonable for them to request a consistent regulatory framework in which to operate. A single worldwide regulatory approach or regulatory organization is neither feasible nor desirable because the national differences in the factors affecting the design and intensity of monitoring and enforcement activities (e.g. companies and securities law, the strength of the accounting profession, the extent to which investors are able to exert influence over companies, etc.) are likely to persist for a long time. However, it is more realistic to hope that, over time, there could be agreement on common principles and on co-operation arrangements. International agreement on common principles would make cross-border regulatory co-operation easier and more effective. As yet, however, there are no equivalent organizations for the national audit regulators. Given the recent creation of independent audit regulators in a number of countries, and the likelihood of this number increasing in future, we believe that there would be merit in the establishment of an international mechanism to facilitate exchange of information and the development of common principles which would help to reduce the risk of inconsistency or duplication. [8: “An Overview of the International Federation of Accountants, International Standards on Auditing, International Education Standards, the IFAC Code of Ethics and Statements of Membership Obligations” By Graham Ward, President, International Federation of Accountants ; World Bank Advanced Program in Accounting and Auditing Regulation Module 15 ; December 20, 2005] Harmonization process still hasn’t strike the problem of Small and Medium Enterprises (SME’s) and their external reporting. This means that international accounting standards for SME’s still haven’t been developed, but, it is important to emphasize, the problem of SME’s financial reporting is now under consideration in relevant international accounting associations (such as IFAC). IFAC is dealing with the possibility of development of accounting standards for SME’s. The main issue about SME’s financial reporting is: should SME’s applying IFRS or is more convenient to develop special standards only for SME’s. In all EU countries there are national accounting standards developed for SME’s. These standards are prepared according to IFRS and IAS and they must be applied by SME’s for external reporting. Authors have set two hypotheses for this research paper: First hypothesis is: According to the experience of new Member States (EU 10 and EU 15), should Croatia establish the Financial Reporting Council or Board whose purpose would be the development of national accounting standards for SME’s and unlisted companies. The main aim in this hypothesis is, by using the method of description and comparison on Member States, to determine whether is more acceptable for Croatia to develop national accounting standards for SME’s or to use IFRS for SME’s as well as for the listed companies. By analyzing the accounting structure of the EU members, it is determined that all the members have developed national accounting standards for SME’s. Contrary, the analysis of accounting structure of the future EU members indicates that these countries haven’t developed national accounting standards for SME’s and their financial reporting (with the exception of Bulgaria and Moldova). In Croatia there are two streams regarding SME’s financial reporting. One stream considers that SME’s should prepare their financial statements in accordance with IFRS, while the other thinks that it would be better to develop national accounting standards for SME’s. Therefore, the problem of SME’s financial reporting in Croatia still hasn’t been solved. In accordance to the experience of new Member States (EU 10 and EU 15), Croatia should establish the Financial Reporting Council, or it could be named National Accounting Committee or Board, whose purpose would be the development of National Accounting Standards for SME’s and unlisted companies because that is the practice in all EU Members and even for some “future” EU Members. The second hypothesis is: The meaning of Financial Reporting Council or Board (FRC) in interpreting and applying IFRS in Croatia is in accordance with Stabilization and Association Agreement Pact and acquis communautaire. The main aim in this hypothesis is, to determine the functions of FRC in Croatia. The basic functions of FRC should be the interpretation of IFRS and their practical application in Croatian companies. The new Accounting Law, which is adopted, has included all Directives, Regulations, Decisions, Recommendations, Interpretative Communications and Commission Comments. This is all part of acquis communauitaure. Croatia, also, has to enhance institutional framework for consistent applying and interpreting IFRS. According to the new Accounting law, Croatian accounting and accounting standards board stops existing and his role should take Financial Reporting Council (FRC). That body will be established by Croatian Government. Accordingly, FRC is the body which has the possibility of the development of national accounting standards in Croatia. On the basis of analysis of accounting structure of EU members, it is determined that the FRC’s basic aim is to promote confidence in corporate reporting and governance. The FRC’s objectives are to promote high quality corporate reporting, high quality auditing, high quality corporate governance and integrity, competence and transparency of the accountancy profession. According to the new Accounting Law, FRC in Croatia has the obligation to translate and interpret IFRS for practical appliance. That means, basically, good translation and translation on time. But also to develop and enforce National Accounting Standards, which is regulated by the new Accounting Act and recognized in the practice experience of all EU Members. Currently, IFRS are used by all Croatian companies, not only for those listed on the regulated markets. But, FRC has also the opportunity to develop national accounting standards for SME’s. On the basis of this research, it is the author’s opinion that the main objectives of FRC in Croatia should be the same as in the EU members. The authors believe that Croatian FRC should take the effort to develop national accounting standards for SME’s. These standards would make SME’s financial reporting much easier and more confidential. So, Croatia is trying to follow up the trends which are set up by the acquis communautaire and the enlargement of the European Union.

National accounting standards; international financial reporting standards; SME's; harmonization; acquis communautaire

nije evidentirano