Turkmenistan Set to Adopt International Financial Reporting Standards (IFRS)
Enhancing Corporate Financial Reporting and Attracting Foreign Investment
The government of Turkmenistan is planning to adopt International Financial Reporting Standards (IFRS) to enhance the quality of corporate financial reporting and lay the foundations for better financial reporting in the country’s corporate sector. This move aims to facilitate production-sharing agreements with foreign companies by offering special tax incentives and encouraging more transparent financial reporting requirements.
Current State of Financial Reporting in Turkmenistan
Turkmenistan’s current financial reporting regime is characterized by a lack of transparency and accountability, with each agency having developed its own accounting and auditing requirements. The country’s banking system is regulated by the Law on Commercial Banks and Banking Activity, and the Law on the Central Bank of Turkmenistan (CBT), which supervises the banking sector.
Progress Made but More Work Remains
According to a report by the World Bank, Turkmenistan has made progress in recent years in its accounting and auditing environment. However, much remains to be done for the country to achieve compliance with international good practices. The report highlights the need for Turkmenistan to reshape its financial reporting framework in a manner that supports the function of financial information as a public good provided to meet the needs of market participants generally.
Benefits of Adopting IFRS
The adoption of IFRS will:
- Enhance the quality of corporate financial reporting
- Improve transparency and accountability
- Provide a more accurate picture of the country’s economic situation
- Attract more foreign investment and promote economic growth
Recommendations for Implementation
The report recommends that the government adopt IFRS to ensure consistency and comparability of financial statements across companies. Additionally, it suggests that Turkmenistan develop a robust institutional framework for accounting and auditing, including:
- Establishment of an independent audit profession
- System of financial reporting that is transparent, consistent, and comparable across companies
Supporting Smaller Enterprises
The government should provide support for smaller enterprises to ensure they can comply with the new reporting standards without excessive burdens.
Impact on the Economy
The adoption of IFRS is expected to have a positive impact on Turkmenistan’s economy, attracting more foreign investment and promoting economic growth. As noted by a World Bank official:
“The adoption of IFRS will be a significant step forward in Turkmenistan’s efforts to promote transparency and accountability in its financial sector. We are confident that it will have a positive impact on the country’s economy and help attract more foreign investment.”
Banking System
Turkmenistan has 12 banks, with seven being state-owned, one privately owned, two held jointly by the state and foreign investors, and two foreign-owned. The country’s financial sector is dominated by state-owned enterprises, which operate either as state-owned enterprises or are run by specified ministries or agencies.