Combining Socialism and Capitalism: Accounting Practices in Soviet Joint Ventures

Combining Socialism and Capitalism: Accounting Practices in Soviet Joint Ventures Mariia Romanova Department of Economic and Social History, DATAREV Project 24.05.2025 Page 2 24.05.2025 Page 3 Research Questions •Were joint ventures a space for experimentation and the coexistence of capitalist and non-capitalist systems? •What role did accounting play in this context? 24.05.2025 Page 4 Joint Ventures in the USSR (starting January 1987) •This marked “the first attempt to accommodate profit-seeking, market-oriented firms inside a Socialist command economy” (Carpenter, 1991) •New organizational forms were introduced, including partnerships, inactive enterprises, and corporations •Previously, only state foreign trade organisations held monopoly trading rights with Western firms •Prices were administratively set 24.05.2025 Page 5 What accounting system was used in joint ventures? •Accounting was based on USSR standards for state-owned enterprises, in the Russian language •The Soviet ruble served as the base currency for all accounting activities •The system included "synthetic accounts" •Additional accounting in accordance with Western practices was allowed 24.05.2025 Page 6 Comparing Soviet and Western accounting •Valuation of investments •Convertibility of the Soviet ruble •Coincidence and discrepancy between Soviet and Western accounting standards •Conditions for measuring and transferring income 24.05.2025 Page 7 Joint Soviet-British enterprise (1988) •Audited by Ernst & Young •Soviet accountants prepared annual financial statements •The British side also prepared monthly preliminary balance sheets •There was no option to receive profits in the currency of the original investment •There was a lack of trained and qualified accountants 24.05.2025 Page 8 “It is the hope of many of the Soviet people that knowledge of the Western business practices will spread through Russia in the 1990s as quickly as Christianity spread through Europe” (Management Accounting, 1991) 24.05.2025 Page 9