Do I really need to care about bookkeeping in the UAE?

Do I really need to care about bookkeeping in the UAE?

Scritto da MP

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Categorie: Events

Pubblicato il June 30, 2023

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Bookkeeping is part and parcel of every running business. It helps the companies to track their expenses to ensure effective financial management. Not only this, step-by-step deployment of the accounting cycle enables the companies to provide better insights to the stakeholders, potential investors, and quantitative information of monetary assets to the state institutions for audits. For this purpose, the business people in Dubai and across the UAE have to ensure compliance with universal accounting standards for higher transparency and accuracy of financial records.

Many Business Owners decide to setup a company, ignoring that Accounting & Bookkeeping now is mandatory in UAE. Many companies in the UAE to date, despite having exceeded the minimum thresholds, have not yet registered for VAT (read our article dedicated to How businesses can register for VAT in the UAE ).

Ah, the excitement of setting up a business in Dubai! We know you’re charged up to make your mark in the UAE’s thriving business landscape. But let’s not forget about one of the most critical aspects of running a successful business: bookkeeping. You might be thinking, “Do I really need to care about bookkeeping in the UAE?”

The answer, especially in 2023 with Corporate Tax arriving, is a resounding yes!

Nevertheless, almost all the authorities in the UAE ask for financial statements every time you go to renew your license, in particular the Federal Tax Authority. For this purpose, companies have to consider account audits to generate performance reports of your company. When you need a loan to facilitate your requirements in the company, the banks inquire for a copy of the financial accounts your company has dealt with. The suppliers in the UAE also ask for the financial account statements to help you in your credit facility

All businesses follow accounting standards quite well. If you are new to the business and don’t know any detail about this – The article is aimed to help you understand different types of standards used internationally and the one recommended for managing business accounts for regulations compliance in UAE.

WHAT ARE THE ACCOUNTING STANDARDS? DEFINITION & TYPES

Accounting standards are the principles set for financial reporting. The rules are basically specified to record how the transactions are to be made. It provides some leverage and some financial information to the creditors, lenders, and investors.

Basic accounting is very much required for the businesses operating in Dubai or anywhere in the world. The accountant needs to constantly update the financial records; otherwise, there will be too many accounts to deal with. The companies have to install the accounting software to process all the financial transactions happening from and to the company. They have to also take care of the receipts, disbursements, reimbursements, and all the receivables regularly too keep the company financially healthy.

Reportedly, many people are confused in UAE about the recent modifications in the design and format of financial record management. Some accounting standards are used internationally. Let’s understand the standards recommended for bookkeeping journal management and the creation of financial statements.

So, the companies adopt different formats and rules to manage their accounting record. In this regard, Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) are two of the most frequently used bookkeeping principles.

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

International Accounting Standards Board (IASB) has issued IFRS as the international accounting standard for accomplishing the tasks and activities of financial management. It deals with particular types of events and transactions for financial reporting. The IFRS explains a comprehensive way of working for the accountants to maintain their records. The set of principles are designed to ensure a common language that is well understood by the business people and accounting companies across the world.

ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

GAAP is comprised of all essential principles and rules to deal with the intricacy, complexities, and accounting legalities for managing corporate accounting.  GAAP is the foundation of accounting methods as approved and used by the Financial Accounting Standards Board (FASB). The deployment of GAAP requires extensive accounting services because it is used to manage balance sheets, revenue recognition, and outstanding classification of items and shared estimations for public disclosure.

DIFFERENCE BETWEEN IFRS AND GAAP

Presently, more than a hundred countries in the European Union (EU) and Asia are actively using IFRS to communicate accounting affairs globally. However, the USA and Canada are still adhering to GAAP. The major differences between the standards of accounting are as given:

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

1 The method is used by more than 100 countries across the globe. The method is used by a few countries, including the USA and Canada. It is a generalized technique defined by the companies distinctively.
2 The standards are approved by the International Accounting Standard Board (IASB) Financial Accounting Standard Board (FASB) has developed and introduced the method.
3 IFRS enables the business to reverse inventory under critical business conditions Businesses are prohibited from making inventory reversal while using GAAP
4 The business can capitalize on the development costs in IFRS. The Cost of development is considered an expense for the companies.
5 IFRS doesn’t support Last In First Out (LIFO) management processes. GAAP supports Last In First Out (LIFO) management processes.

IFRS ARE THE MANDATORY ACCOUNTING STANDARDS IN DUBAI UAE

The Securities and Commodities Authority (SCA) has made it mandatory for the businesses to comply with IFRS as stipulated by the Central bank of the UAE. So, all the companies listed in the NASDAQ Dubai (Formerly known as DIFX), Dubai Financial Market (DFM), or Abu Dhabi Securities Exchange (ADX) is required to manage their accounting records in accordance with International Financial Reporting Standards (IFRS). Therefore, all the companies listed legally on the Abu Dhabi Securities exchange from 2003 onwards are supposed to submit the IFRS financial statements.

Although it is not binding on the businesses that are not listed in the mentioned exchanges, it is suggested to implement IFRS as soon as possible to avoid complications and ensure transparency. If you ever think of opening a company in UAE, you can always search top accountant firms near me on the internet and avail your best services for your company. All the accountant firms in Dubai offer top-notch services, and they also give you some financial consultation. They are really helpful and trustworthy.

In the past, there was no pre-defined standard for the businesses in the UAE, but recently, the state has recommended the businesspeople to deploy IFRS for accounting tasks and activities. Sometimes, the business people get confused to decide what to consider using for their financial regulations compliance.

TRUST CERTIFIED ACCOUNTANTS!

Accounting is essential for every organization located anywhere in the world, including the UAE. It is a process where you record, measure, classify and verify financial information. Also, accounting helps you know where you have used your company funds, and you can know the value and nature of your company’s liabilities.

All the companies functional in UAE are supposed to adopt the IFRS method. Remember! Transparency and corporate ethics are always to be followed. The accounting of your company has to be done with integrity. To facilitate this requirement, you need to hire top accounting services in Dubai to ensure the accuracy of record-keeping and compliance with the standards.

Searching for accounting bookkeepers near you? Contact Us to ensure compliance with the latest rules and regulations in the financial management!

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