Problems of Foreign Direct Investment in Russia

Abstract

More than 100 countries are competing for foreign direct investment. One of the factors that adversely affects the ability to attract foreign capital is the lack of credibility of reported financial information. This barrier is especially prevalent in transition economies, since they have not developed the financial reporting infrastructure that developed countries already enjoy. Adopting International Accounting Standards (IAS) or their successor, International Financial Reporting Standards (IFRS), is seen as one way to overcome this barrier and many transition economies are adopting or have already adopted IFRS as a means of giving credibility to corporate financial statements. All of the former Soviet republics have made some attempt to have their enterprises convert to IFRS. Some have been more successful than others, for a variety of reasons. This paper focuses on Russia’s attempt to adopt IFRS and the problems Russian firms face with the adoption and implementation of IFRS.

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An earlier version of this chapter was presented at the Thirteenth International Conference of the International Trade & Finance Association, Vaasa, Finland, May 28–31, 2003.