Are you thinking of starting a company in the UAE? Or you already kickstarted a business and wanna get everything in order? Well then, you definitely should know about accounting standards in UAE! That’s why today, we’re gonna talk about these standards, what they are, and how you can ensure that your company applies them! So, let’s jump right into business and talk some shop, shall we?
What Are Accounting Standards?
To understand the accounting standards in UAE, we need to talk about what accounting standards generally are. Just like everything in this world, there are laws and regulations to ensure that companies run smoothly. And one of the most important things that businesses should keep an eye on is their financial status. Naturally, there are principles that are set when it comes to financial reporting. These principles, aka accounting standards, regulate the way records of financial transactions are made. Having this kind of operation regulated in a certain way provides leverage and credibility among investors, creditors, and more. Now, what are the types of accounting standards?
Types of Accounting Standards
Basically, there are two types of accounting standards that companies adopt around the world. Let’s check them both out before we dive into the accounting standards in UAE, shall we?
International Financial Reporting Standards (IFRS)
The IFRS is developed by the International Accounting Standards Board (IASB) and more than 140 countries use it worldwide, including the UAE, the EU, and in Asia. The IFRS has a more flexible approach to accounting because it is principles-based. In other words, there is room for interpretation when it comes to the application of the standards. However, because so many countries adopt IFRS, it makes it easy for companies to compare internationally. Naturally, this allows for consistency for companies with branches around the world.
Generally Accepted Accounting Principles (GAAP)
The Financial Accounting Standards Board (FASB) in the US developed GAAP. It is used by US-based companies as it adheres to local rules and regulations. Now, while the IFRS has more flexibility, GAAP is rules-based. This means that it delves into the details and offers specific directions in its application. Now that means that it doesn’t require a lot of judgment on every company’s side. That makes all companies in the US conform to one standard. However, the downside of this is that it makes it harder to compare to global accounting standards.
What Are the Accounting Standards in UAE?
As we already mentioned, the accounting standards in UAE follow the IFRS framework. Moreover, there are local regulations that companies in the UAE must adhere to. Usually, these local regulations ensure that companies stick to the IFRS. Of course, the size of the company matters, so while big corporations must fully adhere to the IFRS, SMEs have their own version, the IFRS for SMEs.
And if you wanna save yourself and your company the trouble, you can hire external services to do the work! Fortunately, you don’t have to look too far because Noraal can handle all your financial work. From accounting to auditing and more, Noraal will ensure that your financial and operational processes work as smoothly as ever!