44. The absence of accounting standards in sensitive areas poses a serious threat
to the quality of the financial information in the corporate sector. This is a major
shortcoming since proper reporting of many sensitive and frequent transactions cannot be
made.
45. Some banks and larger companies in Lao PDR prepare separate sets of
financial statements under IFRS and the Lao Accounting System to satisfy the needs
of shareholders or lenders. This is the case for enterprises that have foreign
shareholders or have borrowed from international creditors, including multilateral or
bilateral donors. While this contributes to the quality of the financial information, it has
the drawback of obliging those companies to prepare two different sets of financial
statements, one for statutory purposes, the other for investors and lenders. It creates a
disincentive for regulators and stakeholders to strengthen the statutory financial reporting
regime and represents an additional administrative burden for those companies.
46. While not required for statutory financial reporting purposes, implementing
IFRS when required for group or lender purposes causes practical difficulties for
companies and their auditors. Discussions by the ROSC team with representatives of
companies and auditors revealed serious implementation issues. Most of these problems
arise from lack of adequate expertise among corporate accountants who find it difficult to
prepare financial statements in accordance with the IFRS. Moreover, Lao accountants in
some cases lack industry-specific knowledge with regard to application of relevant IFRS.
The ROSC team observed this problem is pervasive in the banking and insurance
industries.
47. Evidence suggests the lack of adequate capacities to prepare IFRS-based
financial statements. The ROSC team’s discussions with company management during
its due diligence mission led it to believe that the companies may not have adequate
resources or ability to prepare IFRS-based financial statements. It is possible therefore
that the auditors either prepared or provided assistance with preparation of financial
statements, raising a significant independence issue.
48. Corporate financial statements are not easily available. In practice, except for
banks and insurance companies, annual financial statements, in a chart of accounts
format, are submitted by companies solely to the Taxation Department of the Ministry of
Finance. Financial Statements submitted to the Taxation Department are not available to
the public.
49. Banks are required to submit financial statements to the Bank of Lao PDR in
accordance with a chart of accounts introduced in 1997. There is no statutory
requirement for banks to use IFRS. This is an issue of serious concern given the
complexity and sophistication of modern commercial bank operational activity. The
IFRS include standards that have been developed to help banks prepare financial
statements showing a true and fair representation of income and expenditure and assets
and liabilities. For example, IAS 32, Financial Instruments: Disclosure and Presentation,
and IAS 39, Financial Instruments: Recognition and Measurement, were set to enabl
44. The absence of accounting standards in sensitive areas poses a serious threat
to the quality of the financial information in the corporate sector. This is a major
shortcoming since proper reporting of many sensitive and frequent transactions cannot be
made.
45. Some banks and larger companies in Lao PDR prepare separate sets of
financial statements under IFRS and the Lao Accounting System to satisfy the needs
of shareholders or lenders. This is the case for enterprises that have foreign
shareholders or have borrowed from international creditors, including multilateral or
bilateral donors. While this contributes to the quality of the financial information, it has
the drawback of obliging those companies to prepare two different sets of financial
statements, one for statutory purposes, the other for investors and lenders. It creates a
disincentive for regulators and stakeholders to strengthen the statutory financial reporting
regime and represents an additional administrative burden for those companies.
46. While not required for statutory financial reporting purposes, implementing
IFRS when required for group or lender purposes causes practical difficulties for
companies and their auditors. Discussions by the ROSC team with representatives of
companies and auditors revealed serious implementation issues. Most of these problems
arise from lack of adequate expertise among corporate accountants who find it difficult to
prepare financial statements in accordance with the IFRS. Moreover, Lao accountants in
some cases lack industry-specific knowledge with regard to application of relevant IFRS.
The ROSC team observed this problem is pervasive in the banking and insurance
industries.
47. Evidence suggests the lack of adequate capacities to prepare IFRS-based
financial statements. The ROSC team’s discussions with company management during
its due diligence mission led it to believe that the companies may not have adequate
resources or ability to prepare IFRS-based financial statements. It is possible therefore
that the auditors either prepared or provided assistance with preparation of financial
statements, raising a significant independence issue.
48. Corporate financial statements are not easily available. In practice, except for
banks and insurance companies, annual financial statements, in a chart of accounts
format, are submitted by companies solely to the Taxation Department of the Ministry of
Finance. Financial Statements submitted to the Taxation Department are not available to
the public.
49. Banks are required to submit financial statements to the Bank of Lao PDR in
accordance with a chart of accounts introduced in 1997. There is no statutory
requirement for banks to use IFRS. This is an issue of serious concern given the
complexity and sophistication of modern commercial bank operational activity. The
IFRS include standards that have been developed to help banks prepare financial
statements showing a true and fair representation of income and expenditure and assets
and liabilities. For example, IAS 32, Financial Instruments: Disclosure and Presentation,
and IAS 39, Financial Instruments: Recognition and Measurement, were set to enabl
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