In the past, conventional wisdom may have suggested that businesses in the UAE can operate without meticulous accounting practices. Amidst the shifting dynamics, it has become imperative for entrepreneurs considering setting up or already operating within the UAE to possess an in-depth understanding of accounting practices for achieving sustained success. Dispelling any misconceptions, it’s time that entrepreneurs and businesses seek help from accounting services in Dubai.
Nevertheless, effective accounting goes beyond mere compliance and serves as a strategic imperative to form informed-decisions. With accurate financial data in their possession, businesses are better prepared to assess their financial health, identify trends and make plans for superior future growth. Within a tax environment featuring VAT and recently introduced Corporate tax, it has become mandatory for businesses in the Emirates to consult with accountants in Dubai.
Understanding Accounting and Accounting Standards
The process of recording, summarising, classifying and interpreting financial transactions is none other than accounting, which serves as the information basis for a business’s financial position. In tandem, UAE has made it mandatory for all businesses irrespective of size or location to undertake accounting practices. Not only does accounting help businesses keep track of their expenses for financial management but also comes in handy to provide positive growth to stakeholders and investors.
On that note, businesses in the UAE are required to maintain proper accounting records by adhering to prescribed accounting standards. The accounting standards are nothing but a set of principles that govern the preparation and presentation of financial statements, and enable stakeholders to understand and compare financial data across different companies. In addition, it also offers support and relevant financial information to creditors, lenders and investors.
While these standards are regularly revised and updated to reflect changes in accounting practices, the primary goal remains intact with a strong emphasis on ensuring financial statements are accurate, consistent, and transparent across multiple companies and industries. As a result, accounting standards are to be diligently followed by businesses in the UAE, with the assistance of accounting services in Dubai specialising in dealing with a pile of accounts.
Types of Accounting Standards
In UAE’s thriving economy, International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) are two of the most used accounting principles. While both are widely accepted, the IFRS differs from GAAP in certain aspects such as revenue recognition, treatment of intangible assets, and inventory valuation. In a nutshell, the IFRS is considered to be more principle-centric while the GAAP is more rule-based.
NOTE: To comply with these standards, it is pivotal for businesses to rely on IFRS or GAAP-certified accountants in Dubai.
International Financial Reporting Standards (IFRS)
The IFRS accounting standards are issued by the International Accounting Standards Board. Not only is it designed to cater to specific transactions for financial reporting, but also elucidates an extensive way for accountants to maintain records. This set of guidelines ensures the construction of a common language, understood by both businesses and accounting firms across the globe. The financial statements under this standard are built upon the increment basis of accounting and include the following types of financial reports:
- Financial statements
- Reports from the board of directors
- Reports on corporate governance
- Notes to Accounts
- Audit reports
- Reports on management decisions and analysis
- Prospectus
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Generally Accepted Accounting Principles (GAAP)
The GAAP is approved and used by the Financial Accounting Standards Board (FASB), and encompasses guidelines that deal with confusion, difficulties, and accounting rights to oversee corporate accounting. Its implementation requires the interference of comprehensive accounting services in Dubai as it handles balance sheets, exceptional classification, and identifies revenue for public declaration.
IFRS Accounting Standard made Mandatory in UAE
The Security and Commodities Authority has made it mandatory for businesses in the UAE to comply with IFRS accounting standards. This move has enabled UAE to become a global financial centre, backed by the best international practices in financial reporting. Making businesses capitalise on development costs, and its wide implementation in over 100 countries, the IFRS accounting standards have been applied to all businesses in the NASDAQ Dubai, Dubai Financial Market or the Abu Dhabi Securities Exchange.
Within UAE’s competitive business landscape, the significance of accounting cannot be understated, as it acts as an indispensable asset to build a thriving business. Effective accounting practices are the key to long-term financial stability and healthy growth.