Edition: U.S. / Global

Profit? Loss? A Primer for Soviets

Published: September 22, 1990

Nikolai V. Panteleyev has the unenviable task of creating an accounting profession in a nation unfamiliar with profits and losses, let alone concepts like intangible assets, good will or fair value. He likens the job to teaching people to ''learn Chinese overnight.''

His rapidly changing job, called the director of the Department of Accounting of the Ministry of Finance, is one of the more daunting in the Soviet Government as it lurches toward a market economy, and also one of the most important. For the Soviet economy to attract foreign capital, it will eventually need to adopt internationally acceptable accounting standards. To do that, it will have to create an accounting system virtually from scratch. And it will need to teach the new accountants concepts alien to their whole way of thinking.

Mr. Panteleyev, the Soviet Union's chief accountant, spent yesterday in New York at the end of a two-week visit to the United States. He managed to squeeze in a Broadway show and dinner in Chinatown. Seeing Western Practices But his primary mission was a firsthand glimpse of Western accounting practices and of the various regulatory and professional bodies that allow the system to work. Mr. Panteleyev, 58 years old, was also looking for ideas in his role as co-chairman of a group trying to develop internationally acceptable accounting standards for the 2,000 ventures that have been set up between Soviet-owned enterprises and Western partners. The expectation is that the rules will someday serve as a blueprint for the rest of the Soviet economy.

He acknowledges that it will be difficult for citizens of his country to grasp fundamental business concepts. But ''life will make them learn,'' he said through an interpreter. ''We have been experimenting for 70 years, and our people are used to changes.''


The Soviet system, or what exists of it, is far less organized than that of the United States, a country that has one licensed accountant for every 835 people, or that of England, the country that invented modern accounting, where there is one accountant for every 500 people.

Mr. Panteleyev said the Soviet Union had about 300,000 accountants - in other words, one for every 970 people. But American accountants said those professionals are actually more comparable to controllers in this country, because they are unlicensed and because they are more concerned with central planning than with the proper calculation of a company's profits or adherence to generally accepted accounting principles.

No Terms Exist

Nor can the Russian language always capture concepts that the Soviet people are now only beginning to learn. ''The terms just don't exist,'' said Richard Lewis, an accountant in Ernst & Young's Moscow office. ''Yesterday, we were trying to discuss inventory valuation, and were able to make ourselves understood when we discussed the weighted-average cost method.

''But when we went to talk about FIFO and LIFO,'' he continued, referring to the first-in, first-out and last-in, first-out systems of inventory accounting, ''you have to go into lengthy explanations of what they are.''

In some cases, the Soviets have simply adapted English words - like ''good will,'' or they dust off long forgotten words from academic literature, like the word for ''dividend.''

In other cases, like ''intangible assets,'' the words defy translation.

M. Zubaidur Rahman, an accounting professor at the State University of New York in Plattsburgh who along with Ernst & Young was Mr. Panteleyev's host, tried to describe the expression ''fair value'' by coining an improvised Russian term that translates to ''red price,'' because ''red'' generally connotes something desirable in Russian. But the usage did not catch on. Slow Progress While the going may be slow, the Soviet Union has been making progress under Mr. Panteleyev. In the last three months, Western accounting firms have been allowed to compete for the first time against Inaudit, a Soviet group that was the only entity permitted to audit the books of the East-West ventures.

Mr. Panteleyev said he was committed to starting a self-supporting professional institute, along the lines of the American Institute of Certified Public Accountants in New York, as early as next year. The group would be expected to license accountants and create professional standards.

And he has made some headway on his goal to overhaul the rules for joint ventures. In June, the Ministry of Finance issued new rules calling for the ventures to begin accounting for their revenues on an accrual basis, which means when the money is thought to be earned, rather than when the enterprise receives the cash. The hitch: the rule has yet to be applied to expense items.

Mr. Panteleyev intends to tap the growing number of Soviet students who would otherwise have become central planners, urging them to consider accounting careers instead.

''Because the centralized planning system is being eliminated, the universities are reducing the amount of students who study in that field,'' he said, talking like an entrepreneur who is confident that supply and demand will solve his shortage. ''Because of that, we will increase the number of students studying accounting. It will just resolve itself.''

Even though market forces are in his favor, recruiting people will not be a cinch in a country where accountants have a public image that is worse than in this country.

''Unfortunately, the accounting profession is not considered prestigious,'' Mr. Panteleyev said. ''Most of the accountants are women,'' he added, noting that Soviet women have fewer career choices than men.

At Ministry 12 Years

Mr. Panteleyev earned a diploma as a teacher of accounting sciences from the Leningrad Financial Institute. He spent five years teaching before becoming the chief financial officer of a Siberian factory. He then accepted a series of Government jobs, joining the Ministry of Finance 12 years ago. He has been in his current post since 1985.

Asked what role American accountants could play in helping the Soviet Union, Mr. Panteleyev cited a Russian saying that revealed he was not entirely uncritical of the United States model. ''As we say in our country,'' he started with a puckish smile, ''those who are drowning should save themselves.''

Photo: Nikolai V. Panteleyev, the Soviet Union's chief accountant, right, and his deputy, Leonid Shneidmann, left, with James E. Searing of Ernst & Young during their visit to the accounting firm's office in Manhattan. (Fred R. Conrad/The New York Times)