“HOW DOES IFRS TRANSFORM FINANCIAL REPORTING IN THE UAE?”
IFRS has brought a huge change in the global financial industry; these new reporting standards have completely replaced the traditional principles for the better. Along with other countries of the world, IFRS adoption in the UAE is observed; in this region, these new International Financial Reporting Standards are widely adopted by businesses, large organizations, finance professionals, etc. Apparently, witnessing the hype and demand for proficiency in IFRS standards in the UAE indicates that understanding and mastering these standards is no longer a choice but more of an obligation.
Individuals interested in expanding their career in accounting and finance in the region should especially take the IFRS compliance in the UAE quite seriously. Before beginning your learning experience through the IFRS certification in Dubai, it becomes essential to understand this course and the huge changes IFRS has brought forward in comparison to the traditional reporting standards. In today’s blog, we are going to discuss IFRS Adoption in the UAE and its overall impact. To understand, you must read the blog till the end.
IFRS ADOPTION IN THE UAE: KEY DIFFERENCES
There are several prominent changes in practices, standards, and regulations ensured through IFRS; in comparison with traditional reporting standards, the modern IFRS is not only more feasible, more accurate, and transparent but also is recognized internationally. Some of the key differences between the traditional and the modern reporting standards are as follows:
1: REGULATORY FRAMEWORK:
A huge change is seen in the regulatory framework as previously followed reporting standards were not unified, reporting varied depending on industries or sectors, and typically other country’s reporting standards were being followed. Whereas, since IFRS adoption in the UAE it is ensured that the reporting standards are consistent, transparent, and comparable; also, these standards are globally recognized and are quite comprehensive.
2: BASIS OF ACCOUNTING:
Previously, in the traditional accounting era, entities used to either go with a cash basis or a modified cash basis; whereas, in this modern IFRS adoption era, entities are strictly instructed to follow the accrual basis. This shows that the basis of accounting has also transformed to make the financial sector better than ever before.
3: FINANCIAL STATEMENTS PRESENTATION:
According to the traditional reporting methods, there was no standardized format or structure of financial statements, and the disclosure requirements were also minimal. But as IFRS adoption in the UAE is witnessed, financial statements are standardized and follow a specific format for detailed and efficient presentation. Not only this, IFRS compliance in the UAE also emphasizes enhanced comparability and disclosure requirements.
4: MEASUREMENT AND VALUATION:
In traditional reporting practices, the fair value used to be limited, and the assets were generally recorded at historical cost with nearly no revaluation; the modern IFRS standards demand fair value measurements and accuracy in current values.
5: DISCLOSURE AND TRANSPARENCY:
The disclosures of traditional reporting were basic, and the narratives were often minimal; however, the IFRS standards are quite the opposite. Modern reports require extensive disclosures; not only this, but the transparency of these IFRS reports enhances the understanding and decision-making of all the stakeholders.
6: IMPACT ON STAKEHOLDERS:
The core focus of the previously followed reporting standards was to focus on local reporting and regulatory compliance; however, the modern standards are more focused on earning stakeholders’ investor confidence and global integration. This helped build trust through transparency in financial statements, as it is helpful in letting the business landscape grow through foreign investments, etc.
CONCLUSION:
IFRS adoption in the UAE has indeed changed the financial reporting for the better; it has had all the positive impacts on financial statements, entities, and stakeholders as well. The transformation of the new reporting standards has increased the transparency, accuracy, comparability, and global integration of the reports. Therefore, finance students and professionals should understand and follow these international reporting standards to become proficient in this and have a competitive edge in the market.
FREQUENTLY ASKED QUESTIONS (FAQs)
Q1: What were the core reasons to switch to IFRS in the UAE?
Ans: The core reasons why these international financial reporting standards are highly adopted in the UAE are the global alignment, improved comparability, better compliance, and increased foreign investments.
Q2: Before IFRS, which traditional reporting practices were used in the UAE back in the day?
Ans: Back in the day, traditional practices included the use of local regulatory, parent company policies, simple cash basis, or historical cost accounting, etc.
Q3. When did the UAE start adopting the IFRS?
Ans: The UAE first adopted these advanced international reporting standards in the early 2000s; back then, listed companies and banks were mandated to follow these newly launched reporting standards.
