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Reporting of Accounting and Financial Information in the UAE

A company’s accurate bookkeeping and accounting processes reflect the accuracy of its financial statements. Accounting is the function of verifying, recording and reporting a company’s financial and non-financial data. On the other hand, financial reporting goes beyond accounting. Financial and management accounting is what we do with accounting information. Financial reporting systematically presents accounting data to governments, shareholders, investors, and other interested parties. In the U.A.E., it is mandatory to follow International Financial Reporting Standards or IFRS Accounting Standards.

WHAT ARE THE ACCOUNTING STANDARDS FOLLOWED IN THE UNITED ARAB EMIRATES?

Companies operating in the U.A.E., including those affiliated with the Dubai International Finfancial Center (DIFC), comply with the IFRS regulations for accounting services in the U.A.E. before 2012, the I.F.I., or Islamic Financial Institution operating under the DIFC, was subject to the F.A.S. (Financial Accounting Standards), audited by AAOIFI stands for (Accounting and Auditing Organization for Islamic Financial Institutions). However, after two years of providing grant applications, IFRS is now a regulated accounting standard in the United Arab Emirates.

WHAT ARE THE COMPONENTS OF IFRS FINANCIAL STATEMENTS IN THE U.A.E.?

Under IFRS, management prepares financial statements on an accrual basis. Since the income statement and balance sheet have accrual accounting, the cash flow statement, on the other hand, starts with a company’s net income, calculates economic activity, and passes it on. to the cash book. Therefore, the statement of cash flows needs to be prepared on an accrual basis.

1. STATEMENT OF FINANCIAL POSITION OR BALANCE SHEET

The balance sheet represents an entity’s financial position at a given time. The balance sheet is divided into assets, liabilities, and equity. Plant, machinery, real estate, tangible and intangible investments, and cash and cash equivalents are some essential categories in the assets section. Liabilities include debts, tax liabilities, financial liabilities, etc. Assets and liabilities are divided into short-term and long-term. Equity is the portion of capital and reserves invested by owners or partners and non-controlling interests.


2. INCOME STATEMENT

The income statement measures the performance of a business over time if it has generated a net profit. The income statement can be presented in two different statements where profit and loss components are mentioned in one statement. Instead, the total income or loss is presented in the statement of comprehensive income.

  • The income statement begins with sales, calculated separately using the effective interest method.
  • Gains and losses are recognized when financial assets are derecognized based on their depreciation costs.
  • Financing costs and loss due to a decrease in value
  • Determining profit and loss of associates and joint ventures
  • Asset reclassification
  • Tax spending
  • Tax Gain or loss from decommissioning, sale, or disposal of assets from decommissioning
  • Another comprehensive report showing the entity’s net income. Any final changes to the components mentioned above of the income statement are discussed here.
  • 3. PROCLAMATION OF CHANGING JUSTICE 

 Equity reconciliation is the difference in equity change between the period’s beginning and end. It reveals the value of data extracted from income statements, other comprehensive income statements, and owner-related transactions regarding contributions or distributions without affecting loss of ownership or control. The dividend per share is decided and then announced.

A simple way to calculate the change in equity is as follows.  

Equity at the beginning of the period + Net income – Dividends +/- Other changes = Equity at the end of the period


4. CASH FLOW STATEMENT 

The cash flow statement gets all of its data from the income statement. Cash flow statements help determine how easily a business can generate cash for its operations in terms of working capital or even decisions like purchasing equipment.

All cash flow statements are divided into three categories.

  • Cash flow from operating activities
  • Cash flow from investing activities
  • Cash flow from financing activities

WHAT IS A FINANCIAL STATEMENT?

Accurate financial statements are generated from a company’s robust and efficient accounting process. Financial reporting helps external parties make better decisions about investments, mergers, acquisitions, and more. All businesses in the U.A.E., including government organizations, adopt the IFRS format.

TYPES OF FINANCIAL STATEMENTS

There are seven types of financial statements: financial statements, reports of the board of directors, management decisions and analytical reports, audit reports, corporate governance reports, notes to accounts, and financial statements. 

  1. ECONOMIC SITUATION

Financial statements include the balance sheet, income statement, cash flow statement, and equity statement. In addition, standard reports must be prepared during the statutory audit in the U.A.E.

  1. REPORT OF THE BOARD OF DIRECTORS 

Decentralized companies prepare a report to the Board of Directors. This report presents an in-depth understanding and analysis of the entity’s performance and key decision-making processes.

  1. REPORTING ON MANAGEMENT DECISIONS AND ANALYSIS

Evidence of Performance reports historical company decisions, competitor analysis, and market research.

  1. AUDIT REPORT

The audit firm in Dubai must comply with all the guidelines related to statutory audits and must be completed as required by the government. Independent audit report and operation following S.A.I. (Supreme Audit Authority), under the Federal National Council.

  1. CORPORATE GOVERNANCE REPORT

C.G.R. reports on company, employees, and management decisions within the accounting and auditing standards framework.

  1. NOTES FOR ACCOUNTS

Each report, whether internal or external, provides additional information about the accounting policies and procedures followed by the company.

  1. PROSPECTUS

Financial analysis reports are presented in the company prospectus, where the information is presented to the company’s investors, shareholders, and stakeholders.

Financial statements bring transparency to how a business conducts its accounting activities. In addition, it allows government and investor intervention to investigate the financial statements and eliminate any possible causes of fraud or mismanagement of the entity’s finances.

 SUMMARY

 With decades of experience providing U.A.E. financial reporting and accounting services to clients across the U.A.E., many are renowned for presenting key findings and helping businesses minimize risks. Navigating through federal tax and regulatory changes, financial reporting for businesses will not only become more complicated in the U.A.E. but there are also strict guidelines that will ensure corporate accountability. In addition, customers are always assured of the quality of work because of qualified auditors and accountants, both domestic and foreign. 

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