Gazprom Wins Accounting Award

Despite coming under fire from minority shareholders for its murky relationship with gas retailer Itera, natural gas monopoly Gazprom has been named the ideal poster child of annual reporting among the nation's large enterprises.

Ironically, the award came less than a week after Gazprom's minority shareholders vowed to sue the company for refusing to submit to an independent audit by Deloitte & Touche.

Other winners include state-controlled savings bank Sberbank among financial institutions, Khantamansiisky Okr Telekom as the leader among mid-sized companies, and Norilsk Nickel, which scored the highest award for the best design.

Sberbank released its 1999 figures to international accounting standards in June last year, but bank officials did not disclose any comparative IAS figures for 1998 and did not provide shareholders with a full breakdown of the 1999 IAS report, leaving many analysts questioning the validity of the data.

The Federal Securities Commission, the national securities watchdog, is taking Norilsk Nickel to court over its purchase of a metal trading company. Norilsk denies any wrongdoing

Last week's awards ceremony was a culminating point of a yearlong competition, initiated by Company business magazine and the National Investment Council, which describes itself as an "independent, nonpartisan organization," said Alexander Lebedev, head of both National Reserve Bank and the council.

The bank is part of Gazprom's financial empire.

The jury sorted through more than 200 reports and 13 finalists.

Company editor in chief Andrei Grigoryev said the competition's main goal — promoting international accounting standards — could be achieved only when local enterprises begin understanding the importance of an open and truthful approach to annual reporting.

While the government still holds off on making international accounting standards compulsory for publicly traded companies, more than 300 firms do so voluntarily, said Donald Beskine, managing director of the International Center for Accounting Reforms.

"Russian accountants have lost their excuses for not preparing their paperwork [in compliance with IAS]," Beskine said. "We should tell these companies to get on with it."

Lack of clear and transparent bookkeeping standards has long dogged Russian enterprises, discouraging foreign interests and making it difficult for local retail investors to navigate the system.

"That's why a well-prepared annual report means a company respects its minority shareholders," Andrei Neshchadin, executive director of Expert Institute, told guests at the ceremony. "It also means shareholders can start trusting a company's management."

Dmitry Yavin, a spokesman for the Confederation of Consumers, a market watchdog that also represents interests of minority shareholders, agreed that a competition such as this can educate current and potential investors and companies' management teams.

But despite some progress, Yavin said, Russia has a long way to go before retail investment can become a mass phenomenon.

"First, we need to convince its people to put their money in the bank instead of hiding it under a mattress," he said. "Trying to [get] average Russian citizens to invest is a lost cause, at least for now."