ECONOMY

New accounting standards must be extended to non-listed companies

Greece must bring its accounting system for non-listed companies in line with that of the International Financial Reporting Standards (IFRS), which are already required by the European Union for all listed companies. The old system greatly diverges from IFRS rules, both in structure (form of financial statements) and content (accounting principles). It’s not logical to keep the old system. The provisions for non-listed companies should minimize the cost of applying the new model. The change should have three goals. First, it must facilitate foreign enterprises, reducing their operating costs and making Greece a more attractive investment destination. In the particularly competitive international environment, it doesn’t make sense for a multinational company to keep its Greek subsidiary running up costs because it is operating under an antiquated accounting system. Second, it should bolster the viability of Greek enterprises. These are not helped by «conservative» accounting principles. They need useful information for timely decision-making. Third, it should also depict greater transparency and a more accurate view of the financial situation of enterprises – something which will reduce costs and improve competitiveness. In recent years, the balance sheets of many enterprises show profits but conceal losses. The proposed changes will hamper neither public inspections nor tax revenue collection. According to a provision for listed firms in Law 3301/2004, it is necessary to separate financial statements from accounts, which a firm may prepare for tax purposes (tax balance sheets). Further, it must be recognized that information technology offers a large potential for limiting both firms’ operating costs and control costs. Another important issue is the creation in the new accounting model of a mechanism that will secure its continuous and immediate updating on the basis of new developments in accounting research and practice. To be sure, this is precisely the weakness of the current model. The basic characteristics have not changed since its introduction 20 years ago. Finally, the adoption of the new model must also strengthen the role of institutional supervisory and auditing agencies. (1) Constantinos Karamanis is a professor at the Athens University of Economics and Business.