Implementing International Accounting Standards (IAS) Implementation in Mongolia
Dondog, L., The Journal of Government Financial Management
From the early 1920s until the 1990s, friendly relations were established between Mongolia and Russia, with Mongolia inheriting the economic and political policies of a centrally planned economy. This Asian country wedged between China and Russia, began moving toward a market economy in the early 1990s. I visited the United States to learn the best accounting practices at this time, and my intentionalong with my colleagues-was to implement International Accounting Standards (IAS) in Mongolia. This following describes our achievements over the last 10 years.
While Mongolia was shifting to a market economy, the country was withstanding a deep economic crisis and accounting practices were suffering as well. Some universities even closed their accounting departments with the idea that accounting would no longer be needed in a market economy.
Nevertheless, instituting and enforcing accounting rules became important to the Parliament, which passed the Accounting Law in 1993. The law requires businesses to comply with IAS; defines the requirements for CPAs and audit firms; and outlines the roles and responsibility of the Professional Accounting Council, which provides CPA certification to eligible candidates. The law also states that CPAs can establish audit firms to provide financial and performance audits, attest to financial reporting and engage in performance auditing.
But after the Accounting Law was passed, many obstacles remained, including:
* Instructions and regulations pursued required in the centrally planned economy were repealed, but the nation's lack of knowledge of IAS resulted in its inability to develop new instructions, forms and regulations.
* Training at universities and colleges was delayed.
To help with the transition, Mongolia received invaluable help from international financial organizations. For example, the World Bank started a training project, as did the Asian Development Bank. A regular training program was supplemented with support from the implementation of IAS in the country's three largest companies.
As a result of this help, faculty members and accounting professionals gained knowledge of IAS, training at universities and colleges continued, IAS manuals and textbooks were published and professionals began preparing for the CPA examination.
Achievements have been realized in the ensuing years. In March of 1996, the National Assembly of Accountants agreed to establish the Mongolian Institute of CPAs, which issued a retraining program for accountants and also approved the Code of Ethics for CPAs. A team of lecturers and professors from the United States and the Philippines conducted intensive training for CPAs. Of 40 accountants, 18 earned the CPA certification.
In addition, the Ministry of Finance and Economics (MOFE) issued accounting procedures in line with IAS, and the curriculum at universities was revised. Five audit firms were licensed for public accounting practice. The Law on Auditing was approved, and the IAS and the ISA were translated in 1995 and 1996, respectively.
The government took training seriously, and with the help of universities and professional associations, IAS was implemented with the strong support of the national professional staff. However, when implementation was reviewed in 2001, the rate of IAS adoption was 27.5 percent in the private sector. About 40 percent of enterprises were not preparing financial statements.
Three actions were taken to combat the poor rate of implementation:
* The Accounting Law was reviewed;
* A Government Program on Development of Accounting Framework was developed, covering 2002-2004; and
* 2002 was specified as the year for developing accounting practices.
These actions attracted the attention of professionals at all management levels. Accountants became more enthusiastic about the new practices, and the government and professional organizations passed more quickly. …