Dubai is one of the fastest-growing business hubs in the world, with many companies from different industries setting up operations in the city. Companies need to keep track of their expenses for effective multinational financial management from UAE. As with any business, companies in Dubai need to maintain proper accounting records and adhere to certain accounting standards.
Moreover, the step-by-step implementation of the accounting cycle enables companies to provide better knowledge to the stakeholders, and prospective investors, and quantitative information on monetary assets to the government institutions for audit.
Most authorities in the UAE request financial statements every time you renew your trade license. To do so, companies should consider account audits to create performance reports for the company.
All businesses properly follow specific accounting standards. This article is the ideal beginning point for someone unfamiliar with accounting standards in the corporate world.
What are Accounting Standards?
Accounting standards are a set of guidelines, principles, and rules that are used to govern the preparation and presentation of financial statements.
These standards provide a common language for businesses to use in preparing their financial statements, making it easier for stakeholders to understand and compare financial information across different companies. It provides support and relevant financial information to creditors, lenders, and investors.
These standards are regularly updated and revised to reflect changes in accounting practices, technology, and business environments. The primary goal of accounting standards is to ensure that financial statements are accurate, transparent, and consistent across different companies and industries.
Accounting standards should be mandatorily followed by businesses operating in Dubai. An accountant should stay up-to-date with financial reports, or they will have to deal with a pile of accounts. Companies need to install suitable accounting software to process the financial transactions happening from and to the company.
International Accounting Standards
International Accounting Standards (IAS) are a set of accounting standards developed by the International Accounting Standards Committee (IASC) that was succeeded by the International Accounting Standards Board (IASB), which now develops and maintains the International Financial Reporting Standards (IFRS). It is similar to the Generally Accepted Accounting Principles (GAAP) used in the United States.
The IFRS and GAAP differ in their treatment of certain accounting principles, such as revenue recognition, inventory valuation, and the treatment of intangible assets. The IFRS is generally considered to be more principles-based, while GAAP is more rules-based.
To comply with these standards, companies rely on IFRS/GAAP certified accountants who provide accounting and bookkeeping services in the country.
International Financial Reporting Standards (IFRS)
International Accounting Standards Board (IASB) launched the IFRS as the international accounting standard to obtain tasks and activities of financial management.
It manages specific types of events and transactions for financial reporting. The IFRS describes an extensive way to work for accountants to maintain their records. The set of guidelines is designed to ensure a common language that is clearly understood by business people and accounting companies across the world.
The management, under the IFRS, prepares financial statements based on the increment basis of accounting. These are some of the components of IFRS financial reporting in the UAE:
- Balance Sheet
- Income statement
- Equity Statement
- Cash Flow Statement
Generally Accepted Accounting Principles (GAAP)
GAAP comprises the essential guidelines to deal with confusion, difficulties, and accounting rights to manage corporate accounting. This accounting standard is the foundation of accounting techniques approved and used by the Financial Accounting Standards Board (FASB).
The GAAP implementation requires comprehensive accounting services, as it manages balance sheets, identifies revenue, and exceptional classification of items and aggregate estimations for public declaration.
Mandatory IFRS Accounting Standards in Dubai
The Securities & Commodities Authority (SCA) has declared it mandatory for businesses to comply with IFRS as stated by the Central Bank of the UAE. By making IFRS Accounting Standards mandatory, UAE has become a global financial center following the best international practices in financial reporting.
All the companies mentioned in the NASDAQ Dubai, Dubai Financial Market, or the Abu Dhabi Securities Exchange should manage their financial records according to the IFRS guidelines.
You may realize that most leading accounting firms in Dubai provide high-quality accounting services along with effective financial consultation, and they ensure great assistance and reliability.
IFRS is widely used by over 100 countries across the world. These accounting standards are acclaimed by the International Accounting Standard Board (IASB). The IFRS enables businesses to reverse their inventory under crucial conditions. IFRS also enables businesses to capitalize on development costs.
Financial Reporting under IFRS Accounting Standards
An ideal and precise financial reporting is derived from a robust and efficient accounting method of a company. Financial reporting enables external parties to make effective decisions on investments, mergers, acquisitions, etc. All the companies adopt the IFRS model in the UAE including government organizations.
Here is the image of the major types of financial reports to be prepared under the IFRS Accounting Standards in Dubai:
Financial Statements: To prepare financial statements under IFRS, companies need to record all transactions in an accounting system and make any necessary adjustments. They then need to prepare the following financial statements:
- Statement of Financial Position (Balance Sheet)
- Statement of Comprehensive Income (Income Statement)
- Statement of Changes in Equity
- Statement of Cash Flows
Reports from the Board of Directors: Under IFRS, These reports should have an overview of the company's activities, address any risks or uncertainties that the company is facing and outline the company's plans for the future.
Reports on Management Decisions & Analysis: This should provide an analysis of the company's financial performance and include information on the company's revenue, expenses, and profitability.
Audit Reports: An Audit report is prepared by an external auditor and it should provide an opinion on whether the financial statements are prepared in accordance with the IFRS and provide any additional insights or recommendations for the company.
Reports on Corporate Governance: The company's governance structure and practices should be included in this report. They should include information on the company's board of directors, any committees that have been established, and the company's policies and procedures for managing risks.
Notes to Accounts: These notes provide additional information on the company's financial statements, including details on specific transactions or events that may impact the company's financial performance.
Prospectus: A prospectus is typically prepared when a company is planning to issue securities, such as stocks or bonds. The prospectus should provide accurate and transparent information on the company's financial performance, including its revenue, expenses, and profitability.
Financial Reporting enhances clarity in the accounting practices conducted by a company. It enables the involvement of the government and investors to examine the financials and remove any potential reason for fraud or irregularities in controlling the company’s finance.
See how to prepare an audit report for Multinational Companies
IFRS Certified Accountants
BMS Auditing is one of the leading accounting firms in Dubai that consists of Accountants accredited and certified under IFRS. The team has a decade of experience in providing quality accounting and financial reporting services to various businesses and companies across the UAE.
We at BMS also ensure that businesses comply with the IFRS standards and maintain financial records accordingly and accurately.
For queries on Financial reporting through IFRS, call BMS for assistance.