BELGRADE (Reuters) – Serbian companies must base their 2004 financial statements on international accounting standards, even if that means lower reported profits, Serbian authorities and an international auditor said yesterday. «The law obliges big, medium and small firms, non-government institutions, insurance firms, bourses and brokers, entrepreneurs and cooperatives to implement international accounting standards as of 2004,» said Sanja Jevtovic of the Serbian Finance Ministry. Organizations funded by the state, such as schools, courts, police, the state-held pension fund and hospitals, are exempt. Until now, businesses have in practice been allowed to adjust profit and loss reports to avoid high taxation or closure. Under old rules, companies and banks reported capital growth resulting from inflation or exchange-rate linked adjustments, rather than just paid-up share capital. «It may look overly ambitious, but it is achievable,» Jevtovic said, addressing a business breakfast organized by consulting and auditing firm Deloitte’s unit in Belgrade and attended by financial managers of both local and foreign companies established in Serbia. The Foreign Investor Council (FIC), a group of foreign banks and firms set up here in 2002, has asked regulators to examine the impact of international accounting standards and has warned they could translate into lower reported profits. Accountants said the authorities believed it would be easier simply to stick to tough international standards rather than engineer brand-new national legislation, whatever the impact. «New financial statements would unveil the true state of play in a company. Foreigners will understand those statements,» Deloitte’s partner Milivoje Cvetanovicin told the gathering.