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Financial Reporting in Moldova: A Comparative Analysis

A recent study has shed light on the financial reporting practices of budgetary institutions in Moldova, highlighting areas where improvements can be made to align with international standards.

Financial Reports Lack Essential Components

According to the study, published in “Ovidius” University Annals, Economic Sciences Series, Volume XXII, Issue 1/2022, the financial reports of budgetary institutions in Moldova lack certain essential components. Specifically:

• The reports do not contain a column for comparison with previous years
• They do not account for expenses related to share of surplus of associates and owners of the controlling entity

Cash Flow Report Analysis

The study also analyzed the Cash Flow Report, which is prepared using the cash method, as required by IPSAS 2 “Statements of Cash Flows”. The report provides valuable information on the execution of funds, including operational, investment, and financial activities. While the report meets international standards, some minor changes are recommended to improve its structure and content.

Budget Execution Report Analysis

The Budget Execution Report, which compares approved and actual budget values, was also examined. According to IPSAS 1, this report should provide information on whether funding has been obtained and used in accordance with the approved budget. The study found that the existing report in Moldova meets these requirements and does not require significant changes.

Notable Omission: Report of Changes in Net Assets/Equity

However, a notable omission is the Report of Changes in Net Assets/Equity, which is a fundamental component of financial reporting. According to IPSAS 1, this report should reflect information compared to the previous year, including surplus or deficit for the period, each element of income and expense, and changes in net assets/equity.

Conclusion

The study concludes that while some improvements can be made to align Moldovan financial reports with international standards, the existing reports are generally well-structured and meet most requirements. Recommendations include:

• Extracting certain items from the Investment activity compartment, including cash equivalents
• Presenting separate columns for distributions to owners acting in their capacity as owners

Source: “Ovidius” University Annals, Economic Sciences Series, Volume XXII, Issue 1/2022