Harmonization of Financial Reporting in Baltic Countries

Financial reporting is strongly influenced by the global harmonization process and the change of valuation paradigms from historical costs towards fair value (market value) approach. Baltic countries joined European Union in 2004 and therefore all listed companies there obligatory have to report under International Financial Reporting Standards framework since 2005. Paper provides an evidence of the evolution of accounting in this region during last 10 years in pre-EU and EU period and compares the accounting systems of Baltic countries to International Financial Reporting Standards using certain statistical measures. Results show significantly high level of convergence between international standards and national standards of Baltic countries. There shall be stated that the low liquidity of financial markets plays a crucial role for decisions whether to use historical costs accounting or fair value approach in national accounting systems.