IFRS: What It Is, Benefits, Importance and Scope

With the rapidly changing business landscape in the UAE, it is becoming increasingly significant for businesses to have a clear and concise financial reporting system in place. Thus, enforcing Financial Reporting Standards for business conduct in the UAE is highly essential. 

What is IFRS?

The International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB). International Financial Reporting Standards is a framework of standards, principles, and practices that companies use to prepare financial statements. The standards are designed and effected to promote transparency and comparability of financial statements across different jurisdictions.

Which Companies Fall Under the Cognizance of the IFRS?

All companies listed on stock exchanges and located in countries that have adopted the IFRS are subject to these standards. Moreover, companies and organizations that have voluntarily adopted International Financial Reporting Standards are no exception.

Is IFRS Mandatory for Accounting in Dubai, UAE?

The UAE Central Bank presently requires Audit Firms in Dubai to follow IFRS as mandated by the Securities and Commodities Authority (SCA). Therefore, it is an essential requisite for all businesses in the UAE to be registered on the NASDAQ Dubai (formerly known as DIFX), Dubai Financial Market (DFM) to maintain their financial statements compliant with International Financial Reporting Standards (IFRS). The IFRS accounting records must be submitted by all firms that have been legitimately registered on the Abu Dhabi Securities Exchange since 2003.

It is advised to adopt IFRS as quickly as feasible to minimize problems and ensure clarity, although it is not mandatory for companies that are not registered on the mentioned exchanges. Businesses need to seek expert consultation from Top Audit Firms in Dubai when considering starting and running a business in the United Arab Emirates. 

Read more: How audit firms in Dubai record financial guarantees per IFRS 9

What Are the Objectives of IFRS in the UAE?

• The primary goal of IFRS is to advance a set of excellent, comprehensible, and legally binding international accounting principles that demand distinguished, clear, and comparable information in financial statements and other financial reporting to aid attendees in the capital markets worldwide and other users in making business decisions.
• To consider the unique requirements of small and midsize enterprises and developing markets. 
• To encourage the use and strict adherence to all set forth rules and regulations in achieving the goals aligned to it.
• To consider the unique requirements of small and midsize enterprises and developing markets.
• To achieve quality solutions through the integration of national accounting standards, international accounting standards, and IFRS.

What Is the Scope of IFRS in the UAE?

• All International Accounting Standards (IASs) and Interpretations published by the former SIC (Standard Interpretation Committee) and IASC (International Accounting Standard Committee) remain in effect until and unless they are modified or discontinued. 
• Despite the legal structure, profit-oriented businesses that engage in commercial, economic, financial, and related operations must adhere to IFRSs for their general purpose, financial statements, and other financial reporting. 
• The primary goal of general-purpose financial statements is to provide details about an entity's financial situation, operations, and cash flows to shareholders, creditors, workers, and the general public.
• Details provided outside accounting records that aid in the comprehension of a complete set of financial statements or enhance users' capacity to make economically sound decisions are referred to as "other financial reporting." Both individual firm and consolidated financial statements must adhere to IFRS.
• An entire set of financial reports consists of a balance sheet, an income statement, a cash flow statement, a statement displaying all equity changes or changes in equity other than those brought on by owner investments and distributions, a description of accounting policies, and explanatory notes.
• A "benchmark" or an "allowed alternative" can be used as an indication that accounting records comply with IFRS. IASB plans to forbid accounting treatments available when developing Standards. Additionally, IASB plans to examine the options in the current IASs to limit their amount. The "black-letter/grey-letter" contrast refers to how IFRS presents basic principles in boldface type and other recommendations in non-bold type. Both types of paragraphs have the same authority. According to IAS 1, conformance with IAS necessitates compliance with applicable IASs in addition to Interpretations, which necessitate adherence with all IFRSs.

Read more: Audit firms in Dubai presentation of contract assets as per IFRS 9

What Are the Benefits of IFRS?

The following are some Benefits of Adhering to IFRS:

• Comparability and clarity
• Low capital cost
• Cuts down the requirement for multiple reporting
• Acquisition's true value
• International transaction
• Establishes a standard
• Planning and forecasting improvements

Seek Expert Consultation From Top Audit Firms in Dubai Today!

It is essential for UAE companies to effectively audit financial statements by the set International Financial Reporting Standards. AFD is a viable and trusted point of conduct, they provide top-notch services that are efficient to seamlessly conduct business in full compliance with the set standards and regulations. So, contact us today and we shall be happy to assist you!