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Implementing International Accounting Standards in Mongolia

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[edit] The Need for Accounting Standards in Mongolia

During the early 1990s Mongolia’s increased relations with Russia caused it to begin moving toward a market economy and during this time the country was going through a huge economic dilemma and the practicing of accounting standards were suffering. A few schools even went so far as to close their accounting departments thinking that accounting would no longer be needed in a market economy. Dr. Dondog, CPA, general director of the Department of Accounting Policy and Methodology of Ministry of Finance and Economy, and president of Mongolian Institute of Certified Public Accountants, thought otherwise and together with a few colleges set out to implement standards that the country could follow.

[edit] Early Implementation

In 1993 the Parliament passed the Accounting Law; this law defined the standards for CPAs and audit firms, required businesses to follow International Accounting Standards (IAS), and outlined the duties of the Professional Accounting Council, who in turn provide CPA certification. Still after the law was passed, training delayed at universities and the country’s lack of IAS knowledge led to no new development of instructions, forms, or regulations. Support from Mongolia’s three biggest companies and continued training led to professionals gaining knowledge of IAS. In March 1996 the Mongolian Institute of CPAs was established and intensive training was given to prepare people for the CPA examinations. Of 40 applicants, 18 became certified and the Ministry of Finance and Economics issued accounting practices in line with IAS and universities revised their curriculums. When executions of standards were reviewed in 2001 it was learned that the rate of IAS adoption was 27.5 percent and about 40 percent of companies were not preparing financial statements.

[edit] Increasing Participation

Three main actions were taken to combat poor participation. The Accounting Law was reviewed, a government program on development of accounting framework was developed that covered 2002-2004, and 2002 was declared the year for developing accounting practices. After these actions, 70 percent of government enterprises adopted IAS; however, 15 percent of small businesses still did not issue financial statements. To fight this it was decided to implement the International Public Sector Accounting Standards using the modified accrual basis of accounting. A new law was passed in 2002 on public sector management and finance and this law required the use of accrual basis accounting in the government sector, using output-based budgeting, and following state audit activities. In 2002 comprehensive education was provided for public sector accountants and within a short time 90 percent of public sector accountants were involved.

Implementation of overall accounting standards were tough in the beginning and the new laws governing public sectors accounting had a slow start in 2003, but now almost all businesses follow the rules and issue financial statements based on the new accounting procedures.

[edit] See also

[edit] References

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