Accounting and Financial Reporting in UAE

UAE authorities are very serious about the accuracy of a company's UAE accounting and financial reporting. They expect you to work within the International Financial Reporting Standards or IFRS accounting standards framework. If you fail, there is hell to pay.

Your company's financial reporting accuracy depends on careful bookkeeping and accounting. Your investors, lenders, and government agencies scrutinise this data. And they conclude you and your company.

So you have to, at any cost, get your UAE accounting and financial reporting right. It is a time-consuming and complex task. It needs knowledge of accounting concepts and the latest changes in the laws and regulations.

This is why new owners must decide whether or not to outsource the accounting for UAE companies they own. Many hire accounting services firms for the task.

Let's see the relationship between accounting and financial reporting.

What is Accounting?

Accounting is the process that classifies, verifies, documents and communicates the company's financial information.

What is Financial Reporting?

Financial reporting is the step-by-step detailing of accounting information. It helps the regulating agencies, shareholders, lenders, and investors in decision-making. Therefore, it must accurately describe the company's financial health.

IFRS Financial Reporting in the UAE

As per the IFRS, company management is responsible for preparing and filing financial statements. They have to prepare income and balance sheet statements using accrual accounting practices.

The cash flow statement is not prepared using accrual accounting practices.

Balance Sheet Statement

This document presents the company's financial status at the given time. It details assets, liabilities, equity, Etc.

The assets (current and long term) section covers plant, machinery, cash/equivalent, property, tangible/intangible assets, Etc.

The liability (current and long term) section covers payables, tax and financial liabilities, Etc.

It also covers equity, i.e., invested capital and reserves. It is owned by owner/partner/not-controlling interests.

Income Statement

This document provides details of your company's performance over a period. It can be reported as a statement giving elements of profit and loss. In a comprehensive statement, it is presented as total income or loss.

Statement of Changes in Equity

The difference in the change in equity over a period is shown with equity reconciliation. It arrives at a value based on data from profit and loss statements, comprehensive income statements, and owner's transactions.

Cash Flow Statement

A cash flow statement is prepared using data from the income statement. It shows how your company can generate cash through operations. This document is presented in 3 parts: Cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

Financial Reporting in UAE

You have to follow the IFRS format for UAE accounting and financial reporting. You must prepare seven financial reports to be compliant. They are as follows:

Financial Statements

These include balance sheets, income statements, cash flow statements, and shareholder equity statements. You have to prepare these reports for statutory audit in UAE.

Directors Report

This document presents a detailed analysis of equity performance and critical decision-making.

Management Decisions and Analysis Report

This report presents information on the efficacy of decisions made by the company management. It also provides competition analysis and market research data.

Audit Report

You must follow all the prescribed statutory audit guidelines to prepare your audit report. An independent audit firm prepares the report. Supreme Audit Institution regulates these companies.

Corporate Governance Report

This report details accountability for the company's decisions, management, and employees.

Notes of Accounts

Internal and external audit reports render extra details on the company's accounting policies and procedures.

Company prospectus

Your accounting services firm prepares a financial analysis report. You can include it in your company's prospectus. It is helpful to the company's investors, shareholders, and stakeholders. Doing so helps you to be transparent about how you conduct accounting.

Accounting services firms assist in accounting for UAE companies. And it means you do not have to be vigilant in UAE accounting and financial reporting. These professionals take up the responsibility and give you free time.