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Flag of Serbia

Republic of Serbia
Република Србија
Republika Srbija


Capital (and largest city):

Official languages:


Serbia applied to join the EU in 2012 and is in the process of aligning its legal and institutional framework with the EU acquis. In December 2013 the European Council agreed that formal accession talks should begin in January 2014. Serbia began moving towards a market economy in 2000 (when the country was formally part of Yugoslavia). A wide range of reforms were implemented, including steps towards setting up a national system for corporate financial reporting.

The first World Bank report on the observance of standards and codes in accounting and auditing (A&A ROSC) in Serbia was published in 2005. It made a range of recommendations for improving the frameworks for accounting and auditing and for raising the quality of the work of accountants and auditors. Serbia received an IDF grant to fund the drawing up of a Country Strategic Action Plan (CSAP) to implement the recommendations in the A&A ROSC. A new law on accounting and auditing was adopted in 2006 and then amended in 2009.

After Serbia was admitted to candidate status for EU membership, laws were amended again in 2013 to more closely align its legal framework with the EU acquis and alleviate the administrative burden on smaller companies. IFRS for SMEs was adopted as the accounting standard for SMEs and a specific standard for micro companies is being developed. Small and micro enterprises are no longer subject to mandatory audit.

Serbia is part of the following programs at the CFRR:


Economic and Business Background for Serbia

Doing Business 2013

"Doing Business" Results for Serbia

The World Bank's annual "Doing Business" reports provide objective measures of the impact of business regulations and their enforcement in 183 economies across the world. Please, visit for more information.

Background Economic Indicators

All the data is taken from World Development Indicators (WDI), which is the primary World Bank collection of development indicators, compiled from officially recognized international sources. It presents the most current and accurate global development data available, and includes national, regional and global estimates.


Executive Summary of the 2005 A&A ROSC Serbia

As work on the economics of information - the role of information in a well-functioning economy - demonstrates, enhancing the reliability and availability of financial reporting is conducive to economic growth and mitigates the risk of financial system instability. In this context, this Report provides an assessment of accounting and auditing standards and practices in Serbia. It uses International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA) as benchmarks, and draws on good practices in the field of accounting and audit regulation to assess the quality of financial information and make policy recommendations.

This report also has regard to the European Union (EU) law (also known as the acquis
). The relevance of the acquis communautaire for Serbia is twofold. First, and perhaps most importantly, because it represents a high-quality model for the regulation of accounting and auditing, which may be applied to countries of differing characteristics. Second, the adoption of the acquis communautaire, as it pertains to accounting and auditing, would be instrumental to further Serbia’s keen interest in deepening economic association with the EU.

This Report highlights significant weaknesses in the quality of financial information, which are detrimental to sustainable economic growth and may allow systemic risks to perpetuate. Regarding the former, inadequate financial reporting by state-owned enterprises hinders the Government’s and the Privatization Agency’s monitoring of those enterprises and its ability to steer the privatization process. It may also distort fair competition between the private sector and those State-owned enterprises. As regards the latter, lack of consolidated financial reporting helps perpetuate systemic risks that go unmonitored in an environment with significant cross-ownership between banks and insurance companies, banks and the real sector, and emerging major financial and industrial groups.

Enhancing the Statutory Framework based on the acquis communautaire and International Standards

This Report highlights significant shortcomings in the legal and regulatory framework and stresses that addressing those should be a priority for Serbia in order to create a robust legal foundation for the provision of reliable financial information to market participants. Three pervasive issues stand out:

  • Inadequate financial reporting requirements. Groups present consolidated financial statements, which—in several cases—are not prepared in accordance with IFRS. Also, financial reporting requirements applicable to banks, insurance companies and listed companies—while much more stringent than for other companies, do not provide users of financial information, including regulators, with financial information reliable enough for decision-making purposes.
  • Inappropriate scope of application of IFRS. The Serbian Accounting and Auditing Law (A&A Law) of 2002 requires IFRS for all enterprises, from sole proprietorships to large enterprises, as from their 2004 financial statements, and for financial institutions as from their 2003 financial statements. This requirement poses several significant problems. First, IFRS were designed for large enterprises, and since compliance with IFRS entails substantial investments, including training and information technology, there is a risk that the costs of applying IFRS in small enterprises may outweigh the benefits. Second, some important accounting and auditing concepts have not yet been consistently mastered by all segments of the accounting profession; managers and regulators. Consequently, the culture of compliance will suffer, even among companies that should be expected to have the resources to comply (e.g. banks, large state-owned enterprises). Experience shows that there is greater success when the application of IFRS is confined to public interest entities only, and when limited resources are focused on ensuring compliance by these entities.
  • Tensions between regulatory/statistical reporting and general purpose financial information. The legal requirement for companies to apply IFRS may conflict with other legal requirements. An example of this is the overly formulaic approach to loan classification and provisioning required under the standard forms which may result in an under or overstatement of the allowance for loan losses as compared to (i) IFRS and, in some instances, (ii) actual economic losses, with a likely consequential impact on capital adequacy, taxation (the allowance is tax deductible), and interest rate pricing. Also, the regulations of the National Bank of Serbia require that the financial statements of financial institutions comply with a fixed format presentation (‘standard forms’) in their general-purpose financial statements, which makes it extremely difficult, if not impossible, to comply with IFRS.

A proposal for a new Accounting and Auditing Law is currently under discussion, which makes this a propitious moment for the ROSC assessment. The Serbian government has a window of opportunity to align its statutory framework with international good practice, including the acquis
, and address some additional pressing areas of concern, including the revamping of the institutional framework governing the audit profession.

Enforcing Financial Reporting Requirements

This Report demonstrates that legal requirements and competence alone are not enough – the commitment to deploy such competence is also essential. Market forces provide certain positive incentives to comply with high standards, but experience in Serbia (and developed economies) suggests that countervailing disincentives operate to discourage such compliance. More emphasis should be placed on the deterrent incentives of robust monitoring and enforcement regimes to achieve a full and balanced combination of capacity and incentives

In this context, the Report suggests that a three-pillar approach to enforcement would be beneficial:

  • Revamp the corporate governance framework to ensure that Directors of a company are responsible for the probity of financial statements both de jure (recently introduced by the new Law on Business Companies) and de facto.
  • Establish a well governed audit profession responsible for reporting on compliance with accounting standards where audits are mandated by law. The Report recommends the establishment of a ‘Chamber of Auditors,’ constituted as a professional body enjoying delegated regulatory authority but subject to a public oversight system. The Chamber should regulate ‘external auditors,’ i.e. those responsible for financial statement audit in accordance with ‘full ISA.’ Among other things, the Chamber should exercise quality assurance over the public interest activities of its members, by way of monitoring of their work; exercise disciplinary authority over its members; and issue audit licenses to both individuals and audit firms. This should be coupled with an oversight system for the audit profession to ensure that quality assurance is, in fact and appearance, an exercise with sufficient public integrity. This report also recommends that policymakers leverage—where possible—the existing structures within the accountancy profession. However, leveraging these structures should not jeopardize the underlying principle whereby members of the Chamber should only include duly qualified statutory auditors, i.e. professionals who meet stringent educational and professional experience requirements.
  • Establish institutionalized financial information enforcement mechanisms. The repeated instances of non-compliance with existing accounting requirements identified in this Report suggest that there could be unrevealed discrepancies in financial statements with possible significant impact, which may not have been adequately flagged by the auditors of these financial statements. This Report recommends that regulators play a more active role in the enforcement of accounting standards in the general-purpose financial statements of public interest entities. While the Report recognizes that this may not be achievable in the immediate future, it points to actions that could be readily addressed by regulators that would have a positive effect on strengthening enforcement. For example, in many instances, regulators should refuse to accept disclaimers or qualified audit reports. Rather, such qualifications should immediately trigger on-site examinations and/or restatements of the financial statements.

Enhancing Academic Education and Professional Training, and “Retooling” Accountants

In addition to these improvements, there is a strong need to improve the capacity of the accounting and audit profession in order to enhance the quality of financial statements and of statutory audit, and promote public trust. The genuine understanding and adoption of these new accounting and auditing requirements requires related education and training for preparers, auditors, and regulators. This Report makes a number of recommendations to address capacity issues.

From Diagnostic to Reform

The recommendations of this Report are mutually supportive in some obvious ways and require a holistic, multi-disciplinary approach to implementation. Also, the Report only sketches the policy recommendations to enhance the quality of corporate financial reporting. The Report strongly recommends that Serbia establishes a multidisciplinary National Steering Committee (NSC) for accounting and auditing reform to advise policymakers, regulators, and other stakeholders regarding the implementation of the recommendations. Based on the successful experience of other countries the Report recommends that the NSC develops a Country Strategy and a detailed Country Action Plan (CAP) to enhance the quality and availability of financial reporting in Serbia. The Strategy should be endorsed by the Government and the CAP should be implemented under the coordination of the NSC and with assistance from international development partners. In this context, the Report recommends that the members of the NSC should include senior representatives of stakeholder institutions with adequate support staff to follow through on the substantial reform agenda ahead.



The primary contact for all World Bank activities in Serbia is the World Bank office in Belgrad.

The technical team at CFRR are pleased to offer support and advice to stakeholders in the area of corporate financial reporting reforms in Serbia. If you have a question about Corporate Financial Reporting that you would like to put to the team, or if you would like information on the reform initiatives of the CFRR, please contact

Country Office Serbia

For information on other World Bank activities in Serbia contact the World Bank Country office:

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