The Challenges of Analyzing Russian Financial Statements

15 Pages Posted: 13 Oct 1997

See all articles by William H. Coyle

William H. Coyle

Babson College

Vladimir V. Platonov

The University of Economics & Finance at St. Peter

Date Written: June 1997

Abstract

Russian financial statements appear to be very similar to their western counterparts. However, there is a lack of transparency due in part to the emerging nature of the Russian market, which includes the lack of effective regulatory oversight, no universally recognized GAAP, and managers unaccustomed to western-style financial reporting practices. Time-series analysis is hampered by the short public life of companies, annual inflation rates which peaked at 2600% in 1992, and changing and inconsistently applied GAAP through the years. Cross-sectional analysis is very difficult. Russian financial statements have limited footnote disclosure and use a hybrid cash/accrual accounting system. For example, accounts receivable are on the balance sheet but revenue is determined under a cash basis. Intangible assets are rarely recognized and tangible assets owned before 1994 were erroneously revalued by the State. Finally, with marginal tax rates exceeding 90%, net income is often significantly understated.

JEL Classification: M41, F30

Suggested Citation

Coyle, William H. and Platonov, Vladimir V., The Challenges of Analyzing Russian Financial Statements (June 1997). Available at SSRN: https://ssrn.com/abstract=34565 or http://dx.doi.org/10.2139/ssrn.34565

William H. Coyle (Contact Author)

Babson College ( email )

Babson Park, MA 02157
United States
781-239-4366 (Phone)
781-239-5230 (Fax)

Vladimir V. Platonov

The University of Economics & Finance at St. Peter ( email )

Sadovaya st. 21
Saint Petersburg, 191023
Russia
7 812-156-3123 (Phone)
7 812-156-3123 (Fax)