The Advantages and Challenges of Adopting IFRS in UAE
Is IFRS an inevitable concept in Emirates? prior to beginning the pros and cons of IFRS let us assess it. Conceptual framework of IFRS is an asset of theoretical principles that underlie the preparation and presentation of financial statements. In the absence of the accounting standards, it is more likely for unfamiliar circumstances to arise. Sometimes these accounting standards are even contradictory. Therefore, it acts as a reference point for preparing the financial statement if there is no adequate accounting Standard. The implementation of International Financial Reporting Standards (IFRSs) needs to be assessed to understand the impact on:
- Disclosure on revenue, expenses, assets and liabilities
In order to cope up with the new challenges in the economy and for a better presentation of the issuance and modifications of the financial statements takes place. As a team of outsourced accountants, we can assist you to cope up with these challenges.
IMPORTANCE OF IFRS
International Financial Reporting Standards is a set of accounting titles that decide how transactions and other accounting procedures are required to be entered in financial statements. It brings transparency and improves the international comparability of the financial statements. IFRS reinforce accountability by lowering the information gap. It ensures economic efficiency and increases the reliability over the financial statements by making the financial statement honest and competent with the code of ethics. The IFRS helps companies to comply with VAT regulations for VAT filing.
ADVANTAGES OF IFRS
1. RECOGNITION TO BUSINESS WORLD
Today, UAE is flying to the heights exploring the gigantic business hub. Reforms have created an efficient and well-functioning financial regulatory system in this business world with generally accepted regulations. While competing with the business sharks it is necessary to access the IFRS regulations while preparing the financial statements to be compliant with the laws. In the case of MNCs, for the finalization of financial statements, IFRS is mandatory.
2. COMPARABILITY WITH INTERNATIONAL ACCOUNTING MODEL
Nowadays, stakeholders have much interest in performing financial markets all over the world. In this transition period, the convergence of IFRS has progressed comparability of financial statements. The reporting standards have improved comparability not only for investors but also for all stakeholders who use the financial statements for the better investment options.
3. GLOBAL ACCEPTANCE
As all companies prepare their consolidated financial statements under IFRS, it has embraced the uniformity in presentation and preparation. To assess the global adoption of IFRS standards, CDA offers real-time monitoring to the application of those standards in each core area.
4. SUPPORTS BUSINESS DIVERSIFICATION
The influence of IFRS in the economic, legal, fiscal framework and funding system has very much impact on the businesses, as they are exposed to high risk. On realizing the requisites, CDA has imbibed the qualities of IFRS to help the entrepreneurs for the Business Diversification. It makes the comparison with different portfolios easier since all statements are prepared by using common standards.
5. BENEFITS TO STOCK MARKETS
Are you worried about investing in the stock market? This is clearly resolved as they are benefited by a conceptual framework of transparency and comparability of financial data available to the investor.
CHALLENGES OF IFRS
1. COMPLEX AND COSTLY
The high cost of IFRS adoption has become a big disadvantage for SMEs. The most strenuous part is, SMEs will be hit by the large transaction cost and the level of complexity of IFRS. In this scenario, CDA’s can provide support to the SME’s by providing Accounting services and IFRS Advisory Services at reasonable costs which are affordable to SMEs.
2. REQUIREMENT FOR QUALIFIED PROFESSIONALS
As you know, the inception of IFRS has influenced changes in all business sectors dealing with accounting and finance. For proper application of IFRS, the assistance of highly qualified accounting professionals is demanded and hiring them is expensive too. Our cost-effective outsourced accounting services can assist you with more informed decisions.
3. INTEGRATION WITH GAAP
Replacing GAAP with IFRS, Is it a debating subject? Yes, there are a lot of controversies going on integrating GAAP with IFRS. In the world of accounting, a convergence of GAAP along with IFRS impacts:
- Corporate management
- Stock markets
- Accounting professionals and accounting standard setters
As GAAP is being rule-based and IFRS being principle-based, this difference has posed a challenge in
- Consolidated statements
- EPS calculation and development costs
4. PROBLEMS WITH LOCAL STANDARDS
The local standards in countries have become a setback in preparing financial statements. Countries with weak structures in place to develop a good accounting system may face issues in shaping and developing meaningful accounting systems rather than adopting already structured standards. The complexity of IFRS becomes more expensive and difficult for local firms with local standards.
HOW CDA DEALS WITH IFRS?
The CDA team consists of well trained, skilled and professionals who are capable of providing the best Accounting and auditing services all over the UAE. We assist the clients with the most recent updates of IFRS 2020. We assure the pros of IFRS and eliminate the downsides of IFRS. Whatever be the current scenario of UAE, we can keep you well-informed of the financial statements of the business and upcoming circumstances.
You may also read, Amendments in International Financial Reporting Standards
CDA has extensive experience with all forms of financing. Our services include Accounting & Bookkeeping, VAT Consultancy, TAX, CFO Services, Management Accounting and Internal Audit.
If you have any queries feel good to contact us. Our expert will offer you a one-hour free consultation.