EU-REPARIS Under the Enterprise Development and Innovation Facility Henri Fortin, Head, World Bank CFRR Multi-beneficiary Private Sector Programming Working.

EU-REPARISUnder the Enterprise Development and Innovation Facility

Henri Fortin, Head, World Bank CFRR

Multi-beneficiary Private Sector Programming Working Group

10th SEEIC Meeting - RCC - Sarajevo, 25 April 2012

The World Bank Centre for Financial Reporting Reform

• Objectives

– Present briefly EU-REPARIS to Private Sector Programming Working Group

– Answer questions from the WG

Accounting Reform and Institutional Strengthening for SME Developmentin the Western Balkans

EU-REPARISUnder the Enterprise Development & Innovation Facility

Project concept (revised April 2012)

Prepared by the World Bank Centre for Financial Reporting Reform

The European Union’s Regional IPA Programme for the Western Balkans

The World Bank Centre for Financial Reporting Reform

• A modern financial reporting system helps create a business climate that supports sustainable growth and can lower the barriers facing high-potential SMEs– Key for SMEs seeking venture capital investors– Contributes to higher credibility vis-à-vis lenders and enhanced credit

quality of SMEs– A core element of the modern language of business– Simple systems with clear relationship to tax reporting help reduce the

burden of tax compliance on local SMEs

Benefits of financial reporting for SMEs

“No transparency, no trustno trust, no credit

no credit, no investmentno investment, no growth”

Martin Gruell, CFO Raiffeisen InternationalREPARIS Ministerial Conference, Vienna, 2006

The World Bank Centre for Financial Reporting Reform

• Adapting country systems to provide tailored solutions to SMEs

• Building countrywide capacity for accounting & tax professional services to SMEs

• Equipping SME with skills to translate business ideas into fundable, sustainable proposals

• Pilot project on SME financial reporting in the context of loan applications

Bankability and investability Cost of doing business

EU-REPARIS and SMEs

The World Bank Centre for Financial Reporting Reform

• Fully-aligned objectives: improving access to finance and the business environment for high-potential SMEs

• Activities could be expanded to include TA in related areas (e.g., corporate governance)

• Closely integrated through– Technical advice to other EDIF components/activities on issues

involving financial reporting and auditing

– Implementation alignment and synergies• Close coordination with and regular reporting to EDIF partners

• Agreed-upon arrangements at EDIF level will be strictly applied

• Vienna facilities available for EDIF regional meetings

– Shared or consolidated networks of participating-country experts/officials

EU-REPARIS within EDIF

Attachment:Presentation to RCI Steering Committee on EU-REPARIS13 December 2011, RCC Sarajevo

The World Bank Centre for Financial Reporting Reform

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• Western Balkan countries: EU enlargement countries• Implementing the acquis communautaire in the area of

corporate financial reporting• Since 2008: “REPARIS” program to support Accounting

Reform and Institutional Strengthening in W. Balkans• Regional activities and in-country engagement• Significant results to date

– Increased country ownership and commitment for reform– Enhanced capacity– Laws being drafted, institutions established / strengthened– Transposition and implementation are happening

• REPARIS program (funded by Austria, Lux. and Switzerland)

comes to an end in 2013

Current program for W. Balkan countries

Presentation to RCI SC on 13/12/11

The World Bank Centre for Financial Reporting Reform

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• Corporate Financial Reporting: essential to competitiveness and sustainable economic development– No numbers – no knowledge: numbers tell the story of what

happened and what is planned, for all enterprises– Same number system is needed to compare one company

with another and one year with the next– A financial reporting system is needed to set clear

requirements on reporting by enterprises– Institutional arrangements for auditors and accountants to

ensure quality/integrity of audit and accounting services to enterprises

– Standards ensure that the same transactions accounted for using the same approach

– EU standards provide a common approach for single market and single economic space

Financial Reporting: What and Why

Presentation to RCI SC on 13/12/11

The World Bank Centre for Financial Reporting Reform

Investors

Banks

Statistics officeFinancial sector

regulators

Tax authorities

Public at large

Reliable, transparent

and comparable

accounting and financial reporting

Growth and employment generation

While avoiding undue costs

Improved public administration

Financial stability and development

Benefits of sound corporate financial reporting

Presentation to RCI SC on 13/12/11

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The World Bank Centre for Financial Reporting Reform

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• Ensure that the country systems provide tailored solutions for SMEs and small and medium accounting/audit practices– Avoiding a one-size-fits-all approach– CFR not only about large corporations and fin. institutions– EU focus on simplification and “think small first”

• Training of trainers on relevant standards• Building countrywide capacity to provide SMEs with

professional services in accounting and tax returns• Equipping SME with skills to help them translate

business ideas into fundable, sustainable proposals

Increased bankability / ability to secure capital funding from private investors, donors, etc.

Reduced cost of doing business

CFR and Small and medium enterprises

Presentation to RCI SC on 13/12/11

The World Bank Centre for Financial Reporting Reform

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• Support participating countries in(a) Efforts toward completion of acquis transposition(b) Developing capacity to implement the acquis and thus

achieve quality financial reporting and audit practice• Practitioners’ capacity to apply EU standards• Regulators’ capacity to enforcement / supervise• Policymakers’ capacity to adapt the country system to

evolving EU framework• Financial reporting literacy among the business

community

• Support the process by which EU monitor progress in implementation of the acquis

EU-REPARIS: Objectives

Presentation to RCI SC on 13/12/11

The World Bank Centre for Financial Reporting Reform

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• Help countries develop a record of successful implementation of the acquis

• Policy advice and technical support in partnership with – Commission / DG Internal Market and Services and– Other institutions of the EU (EFRAG, EBA, etc.)

• Draw on the experience of countries that have already completed the process (existing member states, Croatia and other participating countries)

• Build on the work completed and achievements of current REPARIS program, ensuring the reform effort is sustained

EU-REPARIS: Focus areas

Presentation to RCI SC on 13/12/11

The World Bank Centre for Financial Reporting Reform

EU-REPARIS: Overall approach

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Knowledge sharing

Effective, sustainable

implementation

Peer learning and tailored

support

Lessons from successful implementationin participating countries

• EU acquis communautaire• International standards, other

good practices

Presentation to RCI SC on 13/12/11

The World Bank Centre for Financial Reporting Reform

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• World Bank committed to supporting enlargement countries

• CFRR was set up to provide specific expertise in corporate financial reporting

• Other programs implemented by CFRR support the ongoing efforts in W. Balkans– Financial Reform Technical Assistance Program for

member states that joined the EU in 2004 – knowledge cascade opportunity

– ROSC program

– CFRR management and administration capacity• Expertise in implementing reform to align financial

reporting systems with the acquis• Close relations with relevant institutions of the EU and

international organizations

Role of World Bank-CFRR

Presentation to RCI SC on 13/12/11

The World Bank Centre for Financial Reporting Reform

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• Well-functioning financial reporting systems: – key to competitive market economies– Support free movement of capital, single economic space and EU

integration

• W. Balkan countries have started the process to implement the CFR elements of the acquis, with some successes to date

• More needs to be done – reform effort needs to be sustained

• CFRR: strategic partner of W. Balkan countries and EC

• Proposed EU-REPARIS: – Draws and builds on existing program– Increased focus on implementation– Flexible and targeted to produce tangible benefits for each country and W.

Balkans as a whole

Concluding thoughts

Presentation to RCI SC on 13/12/11 END