Welcome to Sarajevo: The Civil War in Bosnia-Herzegovina May Have Ended Seven Years Ago, but the Republic Is Still Fighting to Repair the Economic and Socio-Political Damage That Has Slowed Its Progress towards a Modern Market Economy. Duncan Williamson Reports on His Work in Reforming Local Firms' Management Accounting Practices as Part of the Aid Effort

Williamson, Duncan, Financial Management (UK)

Many businesses operating in eastern Europe have found it hard to cope with the transition from socialism to a market-driven economy. Generally, their accounting professionals have yet to catch up with the market aspects of the economy, the requirements of the international financial reporting standards that many countries in the region have now adopted and the technical aspects of their own new laws on accounting.

The United States Agency for International Development (USAID) is active in reforming accounting practices in the former Soviet bloc. Its work has focused mainly on bookkeeping and financial accounting, including the adoption of international accounting standards. In nay experience, management accounting reforms have tended to hang on the coat-tails of tiffs work, but USAID recently sponsored me to visit the republic of Bosnia-Herzegovina specifically to help implement "cost accounting conversions", having already worked on similar projects in Armenia, Georgia, Kazakhstan, Kyrgyzstan and Uzbekistan.

My brief was to identify a group of local firms that I felt could benefit from a cost accounting investigation and a product cost system design and implementation. I could then recommend to these clients how to reclassify ideas, processes and costs, and then show them how to turn their data into the kind of management information that could be used for effective decision-making.

Typically for companies in former communist republics, firms in Bosnia-Herzegovina still generally use their national chart of accounts, and their manufacturing accounts items are to be found in class three of that chart. There were therefore great similarities between the accounting systems of the three firms I worked with, even though they were in different industries.

The firms had all previously undergone a financial accounting conversion--that is, a team of consultants had worked with the factory accountants to redraft the existing chart of accounts to put it into a style that complied with international financial reporting standards. Although this can be seen as a cosmetic exercise to some extent, many …

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Publication information: Article title: Welcome to Sarajevo: The Civil War in Bosnia-Herzegovina May Have Ended Seven Years Ago, but the Republic Is Still Fighting to Repair the Economic and Socio-Political Damage That Has Slowed Its Progress towards a Modern Market Economy. Duncan Williamson Reports on His Work in Reforming Local Firms' Management Accounting Practices as Part of the Aid Effort. Contributors: Williamson, Duncan - Author. Magazine title: Financial Management (UK). Publication date: December 2003. Page number: 30+. © 2009 Chartered Institute of Management Accountants (CIMA). COPYRIGHT 2003 Gale Group.

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