The Kazakh accounting framework is primarily governed by the provisions of the Law on Accounting and Financial Reporting of 1995, which was last amended in 2007. According to a 2007 World Bank assessment, the amendments enacted in February 2007 mandate the application of International Financial Reporting Standards (IFRSs) by listed companies, large companies, and companies that qualify as public interest entities (PIEs). However, small and medium-sized entities (SMEs) and companies that cannot be defined as PIEs apply the Kazakh Accounting Standards (KASs). The report explained that KASs, although said to be based on IFRSs, differ significantly from their international equivalents. Differences arise largely from fact that KASs were developed in 1995, and, therefore, do not take into account any subsequent revisions made to the international standards. Thus, certain areas covered by IFRSs are not addressed by an equivalent KAS. Additionally, the assessment identified differences in disclosure requirements and accounting policies under the two frameworks. For entities that do not qualify as PIEs, the World Bank recommended setting up a committee to develop a simplified financial reporting system.

General Overview

In a 2007 assessment the World Bank benchmarked Kazakh accounting and auditing practices against International Financial Reporting Standards (IFRSs) and International Standards on Auditing. The World Bank observed that Kazakhstan was among the first in the region to promulgate national accounting standards. Due to Kazakhstan's early initiatives, the World Bank acknowledged that "accounting and auditing is more advanced in Kazakhstan than in most other CIS [Commonwealth for Independent States] countries" (p. ii). Back in 1995, the national accounting standard-setting body started to develop the Kazakh Accounting Standards (KASs), which were said to be based on the international standards in existence at that time. The adoption of the national standards in 1996 was followed by a radical shift, and in 2002, the standard-setting body decided to adopt IFRSs "as is" for certain entities. According to the October 2007 IAS Plus update, the current Kazakh situation with regard to mandatory application of IFRSs includes the following entities: (1) beginning January 2005 all joint stock companies, including listed companies; (2) financial institutions including banks and insurance companies; and finally, (3) beginning January 2006, companies defined as public interest entities (PIEs), including extractive industry companies and companies with governmental ownership. These requirements are mainly based on a size criterion and, as explained in the World Bank report, micro-enterprises would continue to apply simplified tax-based rules, whereas small and medium-sized enterprises (SMEs) will apply KASs. Per the World Bank, "there are differences between the accounting policies used and disclosures made under KAS and those which would be required under IFRS. This suggests that the differences between KAS and IFRS are greater than claimed" (p. v). At the time of the World Bank assessment there were 27 KASs. The report noted that the quality of the KAS-based financial statements was very poor and non-compliance issues were rampant. The report added that "this could generally be attributed to the lack of capacity to comply and enforce KAS on the part of preparers, auditors, and regulators" (p. vi).

The World Bank made detailed recommendations with regard to Kazakh accounting practices and suggested establishing an Accounting Standards Committee or an Advisory Council representing various stakeholders, with the goal of developing a simplified financial reporting system for companies that do not fit the PIE criteria. The report also recommended establishing "a working group consisting of standard setters and tax administration officials to consider how to minimize the barriers to accounting reform currently resulting from the Tax Code and its administration" (p. 24). Additionally, the assessment suggested that "the existing translation process be enhanced in order to achieve a sustainable translation process in Russian and/or Kazakh language whereby the official translation of IFRS is readily available and affordable across the country" (p. 24)..

The Kazakh accounting framework is primarily governed by the provisions of the Law on Accounting and Financial Reporting of 1995 and its subsequent amendments of 2007. In addition to stipulating accounting standards, the Law on Accounting and Financial Reporting also establishes certification and competency standards for professional accountants. As for the Law on Joint Stock Companies, the report noted that "this Law also requires that a company must publish in mass media a balance sheet, income statement, cash flow statement and a statement of changes in equity" (p. 3). However, there are no clear provisions on the requirement of consolidated financial statements. Additionally, "the Law on Securities Market requires any company making an Initial Public Offering (IPO) to disclose information included in financial statements to any interested party" (pp. 3-4).

With regard to regulation, the Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Markets and Financial Organizations (FSA) is the consolidated regulator of the banking sector, insurance sector, securities market, and pension funds. The World Bank observed that "effective supervision by the FSA is hampered by a lack of qualified staff, particularly staff trained in IFRSs, which makes the specific task of monitoring compliance with IFRS problematic" (pp. iv-v). Furthermore, the report clarified, "while NBK [National Bank of Kazakhstan] regulates the system of accounting and financial reporting in banks through adoption of regulations and supporting methodological recommendations, the AFS [FSA] is responsible for monitoring compliance with the accounting, reporting, and auditing requirements for banks" (p. 11). For the banking sector, the World bank stated that although adequate sanctions exist in the Banking Law and the Administrative Violations Code, the FSA does not effectively monitor compliance with accounting and auditing requirements. Banks and insurance companies must prepare financial statements in accordance with IFRSs. The report noted that in the insurance sector the FSA had made a more "diligent effort" to ensure compliance with accounting and auditing standards.

The requirements to publish financial statements for listed companies are contained in the listing rules of the Kazakh Stock Exchange (KASE). Issuers are required to submit quarterly and annual reports to the stock exchange. However, the KASE and the FSA conducted very little monitoring of reporting requirements. The World Bank suggested that disclosure of information by listed companies on the stock exchange website be timely and accurate, and that the KASE strengthen its oversight in this regard.

The Ministry of Finance is the national accounting standard-setter. As explained in the 2007 Chamber of Auditors of the Republic of Kazakhstan (CoA) self-assessment, as a member party of the Consultative Board to the Ministry of Finance, the CoA assists in development of national standards and other authoritative pronouncements. According to the World Bank report, the CoA is the main professional body in Kazakhstan. Empowered by the 2006 Audit Law, "the CoA has the authority to apply to the Ministry of Finance to withdraw, suspend or revoke audit licenses, and it is required, and has the authority under the new Audit Law, to undertake the external quality control of its members" (p. 7). Despite these steps to ensure quality, the World Bank observed that the "Kazakh accounting and audit profession suffers from a number of weaknesses, which results in a chronic lack of qualified professionals" (p. iii). The report also pointed to inadequacies in practical experience of accounting and auditing professionals and lack of trained instructors. With regard to ethics, the CoA adopted the latest International Federation of Accountants' (IFAC) Code of Conduct in October 2006 without any modifications. The CoA is listed as a member on the IFAC website.

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

II

There is insufficient publicly available information that directly addresses this principle.

IFRS 2: Share-based Payment (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IFRS 3: Business Combinations (effective 2004)

II

There is insufficient publicly available information that directly addresses this principle.

IFRS 4: Insurance Contracts (effective 2006)

II

There is insufficient publicly available information that directly addresses this principle

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

II

There is insufficient publicly available information that directly addresses this principle.

IFRS 7: Financial Instruments: Disclosures (effective 2007)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 1: Presentation of Financial Statements (effective 2007)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 2: Inventories (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 7: Cash Flow Statements (effective 1994)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 10: Events after the Reporting Period (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 11: Construction Contracts (effective 1995)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 12: Income Taxes (effective 2001)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 14: Segment Reporting (effective 1998)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 16: Property, Plant and Equipment (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 17: Leases (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 18: Revenue (effective 1995)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 19: Employee Benefits (effective 2006)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 23: Borrowing Costs (effective 1995)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 24: Related Party Disclosures (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 28: Investments in Associates (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 31: Interests in Joint Ventures (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 33: Earnings per Share (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 34: Interim Financial Reporting (effective 1999)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 36: Impairment of Assets (effective 2004)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 38: Intangible Assets (effective 2004)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 40: Investment Property (effective 2005)

II

There is insufficient publicly available information that directly addresses this principle.

IAS 41: Agriculture (effective 2003)

II

There is insufficient publicly available information that directly addresses this principle.