THE IMPORTANCE OF FINANCIAL REPORTING DURING PRIVATIZATION: TURKISH CASE

Abstract

Privatization has been on a lot of countries’ agenda, especially for the emergingcountries for a long time. In Turkey, as an emerging country, privatization plan has been a veryhigh priority among the State Budget income items for three decades. To identify and to explore theaccounting role in privatization is the critical issue for the countries under privatization process. Inthis study, the importance of financial reporting during privatization process is examined. Theoverall responsibility of accounting in privatization is to develop investor confidence to channel theflows of funds and to ensure the effective and efficient use of capital funds. Therefore, without asound accountancy framework, the privatization process would not generate the desired long termeconomic, social, and financial development results. Therefore, we analyzed the period of Turkishprivatization experience by underlying the importance of financial reporting in this process. Forthis purpose, in the first part of the study, we defined the privatization and argued the positive andnegative opinions about it. In the second part, we clarified the role of accounting in privatizationprocess under disclosure, transitional problems, training, valuation problems, and inflationaccounting subsections. In the third part, we discussed the recent accounting developments whichmay effects privatization in Turkey. In the fourth part, we summarized the implementation ofprivatization in Turkey. Then, we mentioned the key issues in privatization process for emergingeconomies. Based on the Turkey’s privatization practices, financial reporting has a very importantrole in the SOE’s privatization process. In our point of view, since accounting has an importantrole in privatization, this role takes place before, during and also after the privatization. It shouldbe taken into consideration that the main objective of privatization is not only to privatize SOE’s,but also keep the sustainability of privatized SOE’s. While privatization creates sources for newinvestments of the governments, it should support the effectiveness and economics of goods andservices in the area of privatization. So the sustainability of privatized companies is very importantas well as their sales. All of the above purposes can be controlled by solely accounting.privatization, accounting, financial reporting, emerging economies, state owned enterprises