Corporate financial statements are one of the most popular data sets among businesses, government agencies, and the public. Financial reporting analysis helps to create a transparent business environment, as well as prevent financial and corruption risks.
In 2021, the State Tax Service published a data set containing balance sheets and income statements of more than 430 thousand legal entities. However, this data set was incomplete, as it lacks some fields (chief accountant’s name, average number of employees), as well as data for the years up to 2020. Moreover, data of legal entities registered under the simplified taxation, accounting, and reporting system, the holder of which is the State Statistics Service, were not published.
What prevents making financial statements publicly available in full? Experts and government officials discussed pressing issues during a round table discussion entitled “Why are financial statements still not publicly available?”
“The Ministry of Digital Transformation is ready to help government agencies responsible for publishing financial statements, including the State Statistics Service, to publish these data in all possible ways. There are currently some delays in the process. For example, the State Statistics Service still doesn’t provide the Ministry of Justice with information for publication in the Unified State Registry. The primary task is to develop a mechanism that will help to comply with all the provisions of the legislation on the publication of financial statements. We hope this will happen soon,” Mykhailo Kornieiev, Head of the Open Data Expert Group of the Ministry of Digital Transformation of Ukraine, commented on the current situation.
According to representatives of the State Tax Service of Ukraine, which is one of the holders of information to be published in the open data format, the Service officers are working on possible options and checking the legal basis for the completeness and presentation of all financial statements. “We have to make sure that we do not go beyond the powers given to us by the Tax Code. There are certain nuances of filing financial statements that affect the completeness of the data. The problem of their regulation should be resolved in the future,” Tetyana Barabash, Head of the Electronic Services and Reporting Office of the Electronic Services Department at the State Tax Service, said.
The potential for using the data of financial statements that were made public is high. BRDO experts conducted an online survey on how Ukrainians use financial statements data and what they lack in data sets. For example, 97% of respondents need data on the financial statements of companies under the simplified taxation system. This information will help businesses gain analytics of markets with “simplified” (such as agriculture, retail markets) and additional opportunities to verify counterparties. Additionally, 87% of respondents require to make financial statements publicly available by 2020.
“The main goal of our analytics is to actualize the need and show what public demand for financial statements data and from whom. We talked to many users, conducted online surveys. All users we interviewed (business owners, journalists, and public activists, representatives of united territorial communities and research organizations) need to have financial statements fully publicly available,” Dmytro Lebedyev, BRDO analyst, presented survey results.
Moreover, state-owned enterprises also need open financial statements. According to Ivan Lakhtionov, a representative of Transparency International Ukraine, about 3.5 thousand enterprises in Ukraine are state-owned, and these financial statements help to manage them effectively and efficiently. Additionally, Ukraine has lost points in the recently published Corruption Perceptions Index. This may be a stimulus for information holders to continue working on making financial statements public.
“Information serves as a brand identity of the state, its asset that provides an opportunity to attract investment funds into the economy. And investors are not interested in the nuances of making financial statements data public,” Danylo Globa, Deputy Director for Legal Affairs, YouControl, said. “Today, the issue of failing to make financial statements public is related to specific persons in the State Statistics Service, not the official position of this agency. And we will work to bring to justice those officials who are constantly making excuses not to publish financial statements in full.”
According to Olena Vyshnevska, Director of the Department of Public Information and Communications, the State Statistics Service supports the position of openness and has done everything that could be done to open financial statements by legal means. “In our activities, we are guided by the law on state statistics that is fundamental to the State Statistics Service. Now the Verkhovna Rada registered a new draft law on state statistics, but it has not been considered yet, and we need help and support to finally consider it,” Olena Vyshnevska said.
Draft law #5886 “On Official Statistics” defines the organizational principles and functioning of the national statistical system, the rights, and functions of state statistics bodies, regulates legal relations in the field of official statistics to provide the state and society with unbiased and objective official state statistical information. In particular, it contains a new provision that directly allows the State Statistics Service to publish financial statements.
“However, it may be a long time before parliamentarians finally consider the draft law. And there are no legal obstacles to publish financial statements now,” Natalia Chornogub, a representative of the Public Council at the Ministry of Digital Transformation of Ukraine, said. “Failure to make financial statements publicly available affects the credibility of the Office of the President, the Cabinet of Ministers of Ukraine, in turn jeopardizing plans to digitalize, increase the country’s investment attractiveness, and violating the rights of Ukrainians to access information.”
All legal grounds for making financial statements public already exist – they are set in the Law of Ukraine “On Access to Public Information” and the Resolution of the Cabinet of Ministers of Ukraine #835.
Meanwhile, public activists and open data support organizations are preparing another appeal to the Prime Minister to speed up the publication of financial statements and require the State Statistics Service to publish these data in full. You can join the signatories of the letter by following the link: https://bit.ly/Zvernennia_PM
The round table was organized by the Better Regulation Delivery Office in cooperation with the OpenUp Ukraine community, youcontrol.com.ua – You Control, and the Public Council at the Ministry of Digital Transformation of Ukraine as part of the RAPID project implemented with the support of the Press, Education and Culture Department of the US Embassy in Ukraine, as well as in partnership with the American Councils and the Open World Ukraine program. The views of the participants do not necessarily reflect the official position of the U.S. Government.
The study based on the BRDO survey is available at the link.