Poland's transition from a centrally-planned economy (CPE) to a market economy began in 1989. Building a market economy out of the failures of a CPE represents an unprecedented process in the history of economic development. At the core of the transition is the privatization of state-owned enterprises (SOEs). Many problems encountered during privatization are accounting related, and before privatization can occur valuation issues must be resolved.
What has been the role of accounting in Poland's transition? Accounting is an interactive process that reflects and creates reality. The accounting process facilitates the calculation of the value created by a firm by attempting to trace the flow of resources through the value-creating process, and it identifies, measures, records, summarizes, and reports transactions. How these transactions are internalized determines how they flow through the accounting process, and, because the former SOEs are complex organizations in transition, decisions concerning when and how to record events can be diverse.
The primary objective of this study is to provide insight into the accounting transition in Poland by addressing issues of ownership rights, valuation, financial reporting, and disclosure. The research question is: How is accounting transforming and being transformed in Poland? The research question is addressed in the context of the political and economic environment of three SOEs privatized and traded on the Warsaw Stock Exchange.
To identify the role accounting played, I examined the financial reports of three of the first Polish SOEs privatized, employing case study methodology. The analysis indicates that accounting facilitated the transition by creating capital with the overstatement of assets. The overvalued assets will have to be absorbed in future periods, and subsequent research should address this problem.
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