Ulf Schneider
Managing Director
Russia Consulting
Do you know how many Russians work as accountants? The answer is 3.5 million, much more than there are civil servants in Russia. There is a good reason for that. Accounting in Russia is a highly complex system and foreigners in particular often complain that they do not understand it. Before we tackle the stereotypes about accounting and accountants in Russia, we should first summarize the real facts. Firstly, accounting in Russia is very much document-driven and requires more human resources than in the west. In practice it is often applied as tax accounting and the accountants deal more with the tax authorities than with real commercial accounting. In fact, tax authorities also keep accountants very busy by making lots of special requests.
One also often hears that an accountant should focus either on foreign languages or on accounting content, but focusing on both would be too complex. However, the role of the accountant in Russia is experiencing radical changes and this division may not be relevant much longer.
Until recently an accountant (now often called a Soviet-style accountant) was an employee who entered data into a program called 1C, generating lots of reports every quarter for the state authorities by applying purely technical tax knowledge. The position of chief accountant was a very high rank in the hierarchy of the company. Bureaucracy governed the company and the management had to listen to what the accounting department said. In the best cases the accounting department and the management did not communicate with each other, but in the worst case the accountants accused management of not doing business in the correct, auditable form; and management argued that the internal tax and accounting regulations were too convoluted for any business to take place. Instead of communicating with each other to reach a win-win situation, it looked more like a lose-lose situation. Fortunately, this situation is less common now.
Modern accountants are consultants, speaking at least one foreign language and studying the International Financial Reporting Standards, or IFRS, in the evening. There is a new generation of accountants with ambitions to play in the International Accounting League.
What has changed? While previously accounting and reporting were mainly done for the state authorities, today they are a financial analysis tool in a more competitive business environment. Accountants in large Russian companies and in western organizations operating in Russia have to provide their management with numbers that are based not only on tax documents, but on reality. Accountants need coordination and organizational skills to cope with the document flow and to end the month with reliable figures.
Nowadays an accountant is also a consultant, advising the director on possible actions and their financial impact. The Accounting and Tax Policy plays a big role in profit and tax planning, but overall there is more choice than before between different accounting and tax rules.
For about 10 years now Russia has 20 accounting standards. Many of them are similar to the IFRS, but traditionally they relate more to theory than practice. Now many accountants identify and apply the possibilities that the Russian Accounting Standards grant, for example about provisions and reserves.
Furthermore, the modern accountant is also a technical master. The standard accounting program 1C provides many options for Cost Center and Profit Center accounting as well as for “mapping” the Russian and corporate accounts. To use these options, an accountant also needs to understand the business he or she works for. Communication and analytical skills therefore have a high value.
Accountants no longer have to choose between deep professional knowledge or language skills, but knowledge of English definitely helps because it provides a door into discussions at the international level that help accountants to understand their trade better.
We are observing that, step by step, Russian accounting is getting closer in practice to “Substance over Form”. In addition to the characteristics of the modern accountant mentioned above, we are seeing more and more ambitious and talented candidates. Identifying them is not always easy, and in practice we see that Western managers often have problems choosing the right people, since accounting and financial experts from the West usually have very little idea about the rules of Russian accounting. To become a qualified accountant in Russia with the above profile is much more difficult than to work as a typical SAP-accountant in the West.