Identifier
Created
Classification
Origin
08ASTANA1456
2008-08-11 10:04:00
UNCLASSIFIED
Embassy Astana
Cable title:  

KAZAKHSTAN - PUBLIC SECTOR STRIVES TO CATCH UP WITH

Tags:  ECON EAID EINV PGOV KZ 
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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
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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
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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
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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.

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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 developed 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