Wondering how developing countries succeed? Then this article is for you.
In 2014, Georgia signed an Association Agreement with the European Union, under which it undertook to gradually bring the accounting and auditing sector closer to EU norms and standards. As a result, in 2016, Georgia passed a new law according the enterprises accounting, reports preparation/publication and auditing. The basic idea of the law is that the financial statements of enterprises should be transparent and public.
According to the law, enterprises were divided into categories and the respective requirements were defined for each category. The category is assigned according to three criteria: the value of the assets, the annual income, and the number of employees. High-end enterprises are required to conduct accounting and financial reporting in accordance with International Financial Reporting Standards (IFRS). Relatively low- end enterprises are required to conduct accounting and financial reporting in accordance with International Financial Reporting Standards for Small and Medium Entities (IFRS for SMEs).
They have the right to use IFRS. However, under the new law, high-end entities are required to provide audits of their own financial statements. The new law also applies to audit firms; in the audit process, the auditor/audit firm is required to comply with International Audit Standards (ISA) and follow the IESBA Code of Professional Accountants (IESBA) established by the International Federation of Accountants (IFAC).
In the end, it should be noted that the new law is a big step forward in the development of the country, as it promotes the formation of financial culture and the production of financial records in accordance with international standards. It also helps companies to attract investors, as they will be able to easily obtain financial information prepared according to international standards, and make an adequate decision based on this information.