High quality financial statements should truly and objectively reveal the financial position, business results and changes of a business entity. Satisfied users of financial statements according to which they make decisions represent the best confirmation of high quality financial reporting. The paper deals with the conceptual framework of financial reporting and with an attempt to create unified and revised conceptual framework as a joint project by FASB and IASB. Moreover, it considers novelties that the framework brings. Also, the paper points to the current state in terms of financial reporting quality in the Republic of Serbia. Furthermore, the paper points to some shortcomings of accounting regulation at the national level as a prerequisite of high quality reporting. Finally, the authors propose certain measures and activities for enhancing financial reporting quality in the current economic and political conditions in the Republic of Serbia.
Quality of financial reporting is the precondition for the effective functioning of capital market due to the globalization of business. In the countries of Eastern and Central Europe, during the period of socialism, accounting and preparation of annual accounts was adapted for needs of planned economy. Today, it is necessary to work on harmonization national with international legislation. Also, they need to promote a culture of financial reporting, because economic entities do not understand the essential role and importance of financial reporting for business potential. In this paper, we consider Slovenia’s, Macedonia’s and Serbia’s normative framework of financial reporting system, in order to give the assessment of the current situation and pointed out the possible directions of improvement of this process. The comparative analysis of legal and professional solutions, which regulates financal reporting system in these countries, we learned some inconsistencies of their legislation in relation to international regulations, especially in the part of financial reporting for small and micro entreprises. In Serbia and Macedonia, perceived insufficient engagement of of professional organizations and bodies, which requires the reaction of the country in terms of defining and monitoring the implementation of regulations governing the conditions and responsibility for performing accounting and auditing work. This would allow business entities to access financial sources under favourable terms, raising their competitive advantages to quality financial information within financial reports, as well as further development of entrepreneurial activity, which is the generator of the most developed economies in the world.
Small and medium-sized entities represent a special group of entities in the economy of a country in terms of organization and structure of financial reporting primarily for external users. The publication of the International Financial Reporting Standards for Small and Medium-sized Entities reveals that the International Financial Reporting Standards are not aligned with the capabilities of small and medium-sized entities, and that they are the basis of the second level of financial reporting. The main task and the goal of IFRS for the SMEs is to simplify the existing accounting regulations for this segment of the company. They have identified the specific needs of the financial reporting of small and medium-sized entities and specific information requirements of this part of the economy. Ease of application through a simpler option valuation and disclosure decreased, reducing the cost of preparing the report, as well as continuity, represent some of the advantages of the new standard.