Organizations must respect the continuous development of the International Financial Reporting Standards (IFRS) alongside strict adherence to current regulations to achieve transparent financial reporting systems. In the approaching years to 2025, the financial statements compliance requirements of IFRS 18 are essential for all organizations operating in the UAE. This guide will give a full IFRS Checklist of compliance and centre on essential points for organization compliance, including general requirements and requirements for primary financial statements and disclosures and management-defined measures.
General Requirements for Financial Statements
A basic comprehension of IFRS 18 must start with an analysis of the general standards that control financial statement preparation. Financial statements require all organizations to fulfill these three requirements.
Prepared on an Accrual Basis: Financial statements must operate based on the accrual method because they should demonstrate transactions according to occurrence instead of cash payment or receipt periods.
Consistent Presentation: The same types of items need to be shown identically at all report cycles so users can perform valid comparison analyses.
Materiality and Aggregation: Users require relevant information presentation, while organizations can group immaterial items with others.
Going Concern Basis: Financial statements should use the going concern basis unless the entity plans to dissolve or stop its operations.
Comparative Information: Financial organizations must show previous-year results next to current statements for proper assessment by users. The general requirements defined by organizations create a stable base to fulfill IFRS 18's requirements.
Aggregation and Disaggregation
The aggregation with the disaggregation process is a fundamental aspect of implementing IFRS 18. Several fundamental points deserve attention in this section:
Aggregation: Financial statements require that identical transactions and events within them be consolidated into single groups. The practice enables simplified information presentation, which makes it easier for users to see the overall financial status of the entity.
Disaggregation: If aggregation prevents proper information disclosure, then it becomes essential to perform data disaggregation. The separation of items occurs when such items maintain material value because they deliver an improved understanding of financial performance or position.
Sector-Specific Requirements: Each business sector needs to follow precise requirements regarding aggregation and disaggregation standards. Organizations need to use IFRS advisory services in Dubai to understand how these rules affect their specific industry sector.
Specific Requirements for Primary Financial Statements
The core financial statements, according to IFRS 18, entail two groups-“ The Statement of Financial Position” and “the Statement of Changes in Equity”, together with the Statement of Profit and Loss and the Statement of Comprehensive Income. Every economic declaration needs to fulfill its distinct requirements, including precise classification of assets and liabilities, clear equity usage, and proper expenses and revenue recognition to attain transparency and comparison clarity for users.
Statement of Financial Position
A financial position statement shows an organization’s capital values along with asset distributions and debt obligations in a single moment. To comply with IFRS 18, organizations must perform the following tasks:
Classification of Assets and Liabilities: The financial statements require all assets and liabilities to receive current and non-current classifications that provide users with liquidity and financial health information.
Fair Value Measurement: If applicable, organizations must measure particular assets and liabilities at fair value to provide users with market-condition-related data.
Equity Presentation: Organizations must organize their equity section to separate stock options and all other types of equity instruments, such as share capital alongside retained earnings, together with all other reserves.
Statement of Changes in Equity
The Statement of Changes in Equity reports the complete transformation of equity during the reporting period. Key compliance points include:
Comprehensive Income: The reporting period requires organizations to present their total comprehensive income with detailed information regarding equity changes because of profits.
Transactions with Owners: The financial statements need to distinctly show all movements in equity that stem from owner-related transactions, including both dividends and the issuance of new shares.
Reconciliation: Every aspect of equity needs to be reconciled separately to show every change during the reporting period.
Statement of Profit and Loss
An organization can find its performance summary with the help of Financial audit services in Dubai during the reporting period in the Statement of Profit and Loss. For compliance, organizations must:
Revenue Recognition: The organization should follow IFRS 18 regulations to identify revenue through the distribution of control over goods and services to customers.
Expense Recognition: The organization should follow accrual-based accounting by matching expenses to related revenues for proper recognition.
Classification: An organization should categorize its expenses into natural and functional classifications to demonstrate resource utilization during the specified reporting period.
Statement Representing Comprehensive Income
A comprehensive income statement includes everything present in the profit and loss statement, together with all recognized income and expense items from the accounting period. Compliance requirements include:
Components of Comprehensive Income: Organizations need to display both profit or loss amounts and other comprehensive income items that consist of foreign currency translation adjustments and changes in revaluation surplus.
Presentation Format: The presentation of comprehensive income can be conducted through a single statement or two separate statements under IFRS 18.
Disclosures and Other Notes
The disclosure of essential information is a fundamental requirement for implementing IFRS standards. Organizations must ensure that:
Significant Accounting Policies: Users need to understand financial statement preparation methods; thus, organizations should disclose important accounting policies.
Judgments and Estimates: Organizations need to reveal which judgments management enacted when applying accounting policies and the crucial assumptions used to make estimates.
Other Relevant Disclosures: The financial reports must contain necessary outside disclosures, such as those for related party transactions and contingent liabilities and commitments.
User-Focused Approach: The disclosure content must reflect user needs because users should obtain the financial information needed to make informed financial decisions.
Management Defined Measures
Organizations utilize non-GAAP financial measures to provide extra information regarding their financial performance. For IFRS 18 compliance in UAE, organizations should:
Define Non-GAAP Measures: Organizations must clearly define every management-defined measure they use in financial reporting during the implementation of IFRS 18.
Reconciliation: Organizations must present the reconciliation between these alternative measures and their equivalent IFRS financial statements so users can comprehend the adjustments that were performed.
Consistency: To boost reporting reliability, organizations need to use measuring methods with defined consistency across different reporting periods.
Conclusion
Businesses requiring help to handle IFRS compliance issues should seek Accounting and auditing firms in UAE services at Dubai, which provides professional guidance. Organizations can receive customized compliance solutions and accurate technical standards through IFRS consulting services that help ensure the highest levels of financial transparency under IFRS rules.
UAE organizations should collaborate with expert IFRS advisory services in Dubai to guarantee compliance, as this practice builds trust with stakeholders while benefiting financial performance alongside sustainability in the competitive market.
To get started with your IFRS 18 Compliance, contact us at +971 50 483 6190 or email us at enquiry@aaconsultancy.ae.
