Transparency and financial reporting, BALFIN Group a step ahead

Blerina Daka - Chief Financial Officer of BALFIN Group

Annual financial reporting represents a standard being long implemented by BALFIN Group and currently constituting a legal obligation in Albania. In a detailed interview, the Chief Financial Officer and member of the Board of Directors of BALFIN Group, Blerina Daka, underlines the standard to be followed in reporting the financial achievements of businesses.

Why do international companies increasingly focus attention on preparing annual financial reports on the company's performance?

  • International corporations consider this report as an opportunity to transmit to shareholders, the public, partners and other stakeholders all the relevant information about the corporation in a holistic way, in the clearest and most transparent form feasible. This report represents a good chance to demonstrate the progress performance in relevant sectors, the annual performance and significant corporate achievements surpassing the financial figures that can be read in the audited financial statements, mainly by professional readers. The Annual Report provides a mechanism to support the creation of a more commercially attractive and differentiated outlook of the business, thus revealing the corporate inner values system, the corporate culture, internal good governance, risk management, or social responsibility to communities where the corporate operates. If you want to get to know a corporation, the first paper you should read is the Annual Report. Of course, its essence is to demonstrate how successful the corporation is in doing business, highlighting elements such as annual profit, turnover or market capitalization value, which are of immense importance to corporate partners and investors. The annual report provides, to all stakeholders, including funding entities, suppliers and customers, an indication and a reassurance of their investment in that corporation. Furthermore, you get to know how well this corporation treats its staff, how much it supports the communities or extend of social responsibility. Reputation and public perception of a corporation's behaviour towards environmental protection, interaction with communities, management of human resources, corruption or similar issues increasingly have an impact on its success. The Annual Report represents a very good mechanism to convey all these values to the public in an understandable and tangible form. International corporations are already aware that transparency in financial reporting represents a key element to their success. It generates a positive climate established around the business and increases credibility in the investors’ community while becoming a competitive advantage in the long run for the corporation.

Since when did BALFIN Group start preparing the Annual Financial Reports and what is the outcome?

    We anticipated and initiated the work for the preparation and publication of the Annual Report before it became a mandatory legal requirement in Albania for the so-called subjects of public interest, where BALFIN Group is also part of. The first Annual Report was published in 2018, in line with some of the best practices of international corporations. The 2018 Report was made available only digitally and published solely online. Later on, it was decided to publish the subsequent 2019 Annual Report in both versions, printed and online, so as to reach as many of the targeted audience and relevant stakeholders. We are fully committed to preserving the most transparent communication with the public and our partners as we consider it as an effective way to disseminate our values and convey what BALFIN Group represents and why it is worth doing business with the Group. Even in the preparation, certification and publication phase of the Annual Report, the BALFIN Group remains a pioneer by being the first Group to apply reporting international standards. We have undertaken one step further ahead than the standard required under the Albanian legislation, therefore embracing the international standards. The preparation of the annual reports has already become an internal norm of our reporting standard.

In a near future, we aim to increase the frequency of preparing financial reports for periods shorter than one year. This objective will be accomplished step by step, along with the expansion of our group and further access to international financial markets, where regulatory requirements for financial reporting standards are more stringent. The next future step anticipated is the accomplishment of the 'credit rating' for the parent company or for parts of the group structures at sectoral level, by prestigious credit rating companies, which is an indicator of credibility to invest or finance the Group as a whole or separate parts thereof. Furthermore, we have enhanced our internal capacities to respond to any regulatory requirements for additional reporting that may arise from the adoption of the new legislation within the country.

- Who certifies the accuracy of these reports and to whom do they serve? 

- The financial information and data related to internal governance and business going concern, which is contained in the Annual Report published by the Group, is certified by the auditors of the consolidated financial statements of BALFIN Group. This constitutes a legal requirement for financial reporting in Albania pursuant to the Law “On Accounting and Financial Reporting”. For groups operating as holdings, i.e. the BALFIN Group, the preparation of the consolidated audited statements constitutes a legal requirement, together with the progress report certified by the relevant auditors. As for other information contained in the Annual Report, it can be confirmed through official sources or publicly accessible information. For example, if the report states that the Group companies have contributed EUR 1.2 million in support of the earthquake catastrophe, this can be easily confirmed through data published by the Earthquake Solidarity Fund and beneficiaries of direct donations evidencing the reconstruction of houses. The Annual Report, as stated above, serves to all stakeholders, but mostly to financial institutions and business partners. When we approach international banks to provide Balfin Group with financing on important projects, their initial list of requirements is topped with whether we have prepared the Group's Annual Report and consolidated financial statements. This report facilitates and provides them with information to better understand the business performance and the targeted future path of the Group.

To the best of your knowledge, are there many companies in Albania and in the region that issue their Annual Report and what would be the next step for a large company in terms of financial transparency, in addition to the Annual Report?

    The preparation of the Annual Report in Albania is a standard mainly applied by companies or international foundations that implement the standards implied by parent companies abroad, or otherwise businesses that operate under strong regulatory requirements i.e. the banking, insurance or telecommunications sector. However, it is not a common practice and not widely spread in businesses with Albanian shareholders. This is due to several reasons. First, the legal requirement to prepare an Annual Report has only become effective in the 2019 fiscal year and, like anything new, it requires an adaptation period. Secondly, the emancipation level of these businesses is crucial to acknowledge the benefits that the annual report generates in terms of establishing new business partnerships, being them financing banks or their own clients, or for the reputation of the company itself. Third, each standard demands the allocation of internal resources, whether financial, human and time-wise, to be dedicated to the preparation of quality reports and in a complete and detailed form. As regards the region, i.e. neighbouring countries in the Western Balkans, the situation is similar to Albania, all due to a similar setting in terms of the progress in the adoption of the legal framework governing financial reporting, and the business approach to financial reporting.