08ASTANA1456, KAZAKHSTAN – PUBLIC SECTOR STRIVES TO CATCH UP WITH

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Reference ID Created Released Classification Origin
08ASTANA1456 2008-08-11 10:04 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO7708
RR RUEHLN RUEHVK RUEHYG
DE RUEHTA #1456/01 2241004
ZNR UUUUU ZZH
R 111004Z AUG 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 2961
INFO RUCNCIS/CIS COLLECTIVE 0601
RUEHAST/USOFFICE ALMATY 0657

UNCLAS SECTION 01 OF 02 ASTANA 001456 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAID EINV PGOV KZ
SUBJECT:  KAZAKHSTAN - PUBLIC SECTOR STRIVES TO CATCH UP WITH 
PRIVATE SECTOR ON INTERNATIONAL FINANCIAL REPORTING STANDARDS 
 
ASTANA 00001456  001.2 OF 002 
 
 
------- 
Summary 
------- 
 
1. During June 16-26, 2008, the USAID Accounting Reform Project 
provided a Training of Trainers (TOT) in the application of 
International Financial Reporting Standards (IFRS) to the lecturers 
of a newly established Ministry of Finance (MOF) training centre. 
The TOT capped a series of MOF-requested and USAID-financed seminars 
on the transition to IFRS and its application to the public sector 
which were held in 17 cities and delivered to 1,105 participants. 
On the private sector side, the USAID-supported Certified 
International Professional Accountants Examination Network (CIPAEN) 
completed its tri-annual examinations during June 27-30, 2008.  The 
private sector response to the Certified Accounting Practitioner 
(CAP) and Certified International Professional Accountants (CIPA) 
programs is booming with exponential growth and increases in 
examination fees which have made the network fully sustainable.  In 
Kazakhstan alone there are 4,532 CAP-qualified professional 
accountants.  End Summary. 
 
---------- 
Background 
---------- 
 
2. The United States has consistently stressed the importance of 
accounting reform as a fundamental step to creating a market economy 
capable of attracting investment and countering a wide range of 
economic ills, such as corruption, tax fraud, and money laundering. 
USAID support for accounting reform in Kazakhstan is comprised of 
several critical components: 1) a legal/regulatory enabling 
environment for adoption and implementation of IFRS and 
International Standards of Audit (ISA); 2) training, testing, and 
certification of professional accountants (the CAP/CIPA program) 
and; 3) development of the institutions to support accountancy for a 
market economy. 
 
-------------------------------- 
Legal and Regulatory Environment 
-------------------------------- 
 
3. The accounting and financial reporting system in Kazakhstan first 
received attention with the President's 1995 decree on the Law on 
Accounting of the Republic of Kazakhstan, but little happened until 
the Kazakhstani government mandated the following dates for 
transition to IFRS:  January 1, 2003 for financial institutions; 
January 1, 2005 for joint-stock companies; and January 1, 2006 for 
other entities.  January 1, 2008 was targeted for SMEs to choose 
between National Accounting Standards and IFRS, based on the 
International Accounting Standards Board's 2007 exposure draft. 
From January 1, 2008, following a failure of compliance with earlier 
decrees, all companies, irrespective of size, were required to 
report under IFRS full or IFRS modified (in accordance with the IASB 
exposure draft), if applicable.  State enterprises and budget 
ministries will report under IPSAS (International Public Sector 
Accounting Standards) at a time stipulated by the government at some 
point in the future. 
 
---------------- ----------------------------- 
Kazakhstani Government Efforts to Promote IFRS 
------------------------ --------------------- 
 
4. In 2005, the MOF initiated seminars and conferences on 
preparation of financial statements in compliance with IFRS in order 
to assist and facilitate the transition to IFRS in the real sector 
of the economy.  This was followed by a period of inactivity and 
uncertainty until USAID, at the request of the MOF, conducted a 
series of seminars during January-April 2008 on issues pertaining to 
the preparation of financial reporting in compliance with IFRS -- 
"Transition to IFRS and Application to the Public Sector" -- which 
was attended by leading specialists from auditing firms.  These 
seminars were delivered in 17 cities to 1,105 participants. 
Following this successful program, the MOF requested a TOT program 
for the lecturers of a government training center which the MOF is 
opening to train its own staff in the use and application of IFRS. 
In response to this request, during June 16-26, 2008, the USAID 
Accounting Reform project conducted a TOT and trained 15 potential 
lecturers for the MOF training center.  The lecturers received 
training in the area of IFRS and teaching methodology. 
 
----------------------- ------------------------------------ 
Training, Testing, Certification of Professional Accountants 
------------------------------ ----------------------------- 
 
5. The key to private sector adoption of IFRS is the establishment 
of an independent Russian-language testing and certification 
program.  In 2001, USAID began establishing such a program (CIPA) in 
nine countries of the former Soviet Union, including Kazakhstan, 
Kyrgyzstan, Uzbekistan, Tajikistan, Turkmenistan, Ukraine, Russia, 
Belarus, and Moldova. The CIPA Program comprises a set of seven core 
accounting exams plus a take-home course/exam on Management 
 
ASTANA 00001456  002.2 OF 002 
 
 
Information Systems (MIS). In addition to IFAC's International 
Education Standards, the CIPA Program is based on the model global 
accounting curriculum develo
ped by the United Nations Council on 
Trade and Development/Intergovernmental Expert Working Group on 
International Standards of Accounting and Reporting (UNCTAD/ISAR). 
 
 
6. While training providers for the CIPA training courses originally 
received USAID support, since 2006 the training has been fully 
implemented by the private sector.  Today there are over 60 training 
providers in Kazakhstan.  Likewise, examination fees originally set 
at zero have been raised in Kazakhstan to $120 and now generate 
significant income that is used to expand markets and strengthen 
associations.  Due to its international origins and focus on the 
highest world standards, the CIPA program has gained substantial 
recognition region-wide.  To date, more than 7,200 individuals in 
Central Asia have earned the entry level CAP designation, and 119 
are qualified for CIPA. Kazakhstan leads the region with 4,532 
CAP-qualified professional accountants. 
 
---------------- ------------------------------------- 
Institutions to Support Accountancy in a Market Economy 
-------------------------- ---------------------------- 
 
7. Since December 2001, USAID has supported the establishment and 
operations of the Eurasian Council of Certified Accountants and 
Auditors (ECCAA).  During this period, ECCAA has become a regional 
grouping of the International Federation of Accountants (Kazakhstan 
was named to the Developing Nations Committee) and has grown to 
comprise 32 accounting and auditing associations from 11 member 
countries across the CIS, with its headquarters in Almaty.  USAID 
has fostered a relationship between ECCAA and the Institute of 
Chartered Accountants of Scotland (ICAS), the oldest professional 
institute of accountancy in the world, which has sound governance 
and necessary technical skills and experience to provide support to 
ECCAA. 
 
8. On December 21, 2007, USAID signed a Memorandum of Understanding 
in which USAID acknowledged the effective control by ECCAA of the 
CIPA Educational Network.  The last stage of USAID's support for 
accounting reform will be to facilitate an alliance among ECCAA, 
recognized accounting bodies, and international accounting firms to 
ensure the institutional sustainability of ECCAA. 
 
ORDWAY

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