Impact of Notes to Financial Statements on the Quality of Financial Reporting: Evidence from Croatia and Serbia


  • Branko Z. Ljutic CPA, Tenure Professor, University Business Academia
  • Sandra Jankovic Associate Professor, University of Rijeka
  • Dubravka Vlasic PhD, Assistant, University of Rijeka


notes to financial statements, financial reporting, primary issuers


Purpose – The purpose of this study is to investigate the current practice and the quality of notes to financial statements. The focus is on theirs role in improving the process of financial reporting based on International Financial Reporting Standards (IFRS) of the primary issuers quoted at the local stock markets in Croatia and Serbia.

Design/methodology/approach – In the paper it is used the standard IFRS methodological approach to notes, financial statements and integral process of financial reporting of the leading primary issuers at only two stock markets in these republics, e.g. Zagreb in Croatia and Belgrade in Serbia.

Findings – Research results shall reveal the real information content and quality of notes to financial statements on the Zagreb and Belgrade Stock Exchanges, the materiality aspect, real information content and integration with relevant audit reports, all that in the context of proper informing of the investment community.

Practical implications – The practical implications of the research are to point out to the results of the research that practice of too extensive but not much revealing notes is in the sharp contrast of the concept of IFRS, and mostly notes are translated IFRS without giving any significant insight into the materiality of reporting.

Social implications – On-going process of reforms in financial reporting internationally and on the level of EU is strengthening the importance for transition economies to be the part of these changes regarding some possible form of further more precise and much less extensive approach to the information content of the notes.

Originality/value – Based on our preliminary research the information content of the notes and criteria of materiality shall be one of the main topics of accounting and financial reporting development internationally and in the EU. In this broader context this research should give better insight what is really going in practice in two selected transition economies, one which is the new EU member as Croatia is, and Serbia as a candidate.

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