Kazakhstan started moving towards a market economy after it declared its independence in 1991. A wide range of reforms were implemented, including steps towards setting up a national system for corporate financial reporting. Kazakhstan adopted an Accounting law in 1995, which was amended in February 2007. A new Audit Law, superseding the earlier law of 1988, was adopted in May 2006.
The first World Bank Report on the Observance of Standards and Codes in accounting and auditing (download A&A ROSC) in Kazakhstan was published in May 2007. It made a range of recommendations for improving the legal and statutory framework for accounting and auditing and for raising institutional and human capacity.
In response to these recommendations, the Kazakh authorities are interested in the possibility of adopting the IFRS for SMEs reporting standards (see Accounting for SMEs) as a replacement of the present national accounting standard for all those firms which are not public-interest entities. The CFRR has been appointed to manage a technical assistance project (the Joint Economic Research Program on IFRS for SMEs) to consider this question and the related issue of which companies should be classed as public interest entities.
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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.
This report provides an assessment of accounting, financial reporting, and auditing requirements and practices within the enterprise and financial sectors in Kazakhstan. The report uses International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA), and draws on international experience and good practices in the field of accounting and audit regulation, including in European Union (EU) Member States, to assess the framework for financial reporting and to make policy recommendations.
The policy recommendations aim to help the Kazakhstan Government to support the country’s integration into the global economy, in particular through strengthening the corporate sector’s accounting, financial reporting and auditing practices., Establishing Kazakhstan as one of the 50 most competitive economies in the world through integration into the global economy was named as the top priority for the country’s economic development by the President of Kazakhstan in his address to the nation on March 1, 2006. A key component of developing this competitiveness is the existence of high quality financial information for Kazakhstan companies that foreign partners can easily understand and trust; this information should be readily available, and should be prepared and audited in accordance with international standards.
Kazakhstan has a population of 15.2 million and gross domestic product (GDP) per capita of US$ 5,100 as of 2006. Real GDP growth since 2000 has averaged 9 percent per year, driven in large part by foreign investment in the oil sector. In fact, Kazakhstan has been quite successful in attracting foreign direct investment (FDI) with cumulative inflows at the end of 2004 amounting to US$21.8 billion, the highest in the Commonwealth of Independent States (CIS). However, portfolio investment in Kazakhstan remains small, with Kazakhstan’s Eurobonds accounting for most of the country’s total external portfolio investment.
The financial sector, which is dominated by private commercial banks, has been one of the fastest growing sectors in Kazakhstan. However, while lending to the private sector has increased to US$13 billion in 2004 (almost 33 percent of GDP), credit risk analysis remains underdeveloped and there are problems with assessing the underlying portfolios due to a significant lack of transparency regarding related parties and ultimate economic beneficiaries.
The role of the non-banking financial sector is still limited but growing. Kazakhstan introduced a mandatory private pension regime with individual accounts. As a result, in 2004 there were 16 approved pension funds managing assets worth a total of approximately US$3.7 billion or 8.7 percent of GDP. The insurance sector is still small with insurance premiums representing about 0.7 percent of GDP. The continually growing assets of the accumulative pension funds have had a positive impact on the development of the corporate bond market in Kazakhstan. The equity market is still relatively small, but growing rapidly. The total market capitalization of securities included in the Kazakh Stock Exchange (KASE) official listings at the end of 2004 amounted to US$9.2 billion, an increase of over 68 percent compared to 2003.
Kazakhstan was among the first CIS countries to promulgate accounting standards, initially setting a policy in 1995 of developing National Accounting Standards “based on” International Accounting Standards; the first of these were adopted in 1996. In 2002, the standard setting body took a bold step when it decided to adopt IFRS in its entirety for certain companies, commencing on defined dates. Furthermore, Kazakhstan was one of the first CIS countries to adopt a law on audit activities, which established the concept of auditing standards. As a result, accounting and auditing is more advanced in Kazakhstan than in most other CIS countries. However, as this report shows, much remains to be done if Kazakhstan wishes to raise the quality of accounting and auditing practices to a level in line with more-developed economies.
Andrei Busuioc has over 15 years of experience in the accounting and auditing area in both, the private and public sectors, as well as in lecturing accounting and auditing in university. He joined the the World Bank Centre for Financial Reporting Reform (CFRR) in Vienna, Austria, in 2008 and was responsible for various countries’ financial reporting reforms agenda, was part of Accounting and auditing ROSCs teams, and thematic area of audit regulation in Western Balkan countries.
Prior to joining the CFRR, Andrei worked in the World Bank Country Office in Moldova as a Financial Management Specialist, covering fiduciary activities, public finance management development, and corporate financial reporting development. He is an accountant by training, and a member of the UK Association of Chartered Certified Accountants. Andrei holds a university degree in economics from the Moldova State Agricultural University, and a Ph.D. in economics from the Academy of Economic Studies of Moldova. He also holds a postgraduate diploma in public financial management from the Centre for Financial and Management Studies, University of London. He speaks Russian, Romanian, English and basic Bulgarian.