The International Financial Reporting Standard (IFRS) is a widely accepted and most followed accounting standard all over the world. The IFRS was issued by the International Accounting Standards Board (IASB) and the IFRS Foundation and will assist the management of the companies and accountants all over the world to understand the business numbers of the companies adopting this accounting standard.
The International Financial Reporting Standards (IFRS) is an international accounting standard that was developed to make recording and organizing the accounting data of a company easier. IFRS allows for a fair representation of the accounting data of the company and also takes care that the business is compliant with the various rules and regulations of the country.
Federal Law No.2 of 2015 on Commercial Companies stipulates that all Companies in UAE must follow IFRS. The Securities and Commodities Agency in the country has also made it necessary for all the companies to employ this accounting standard for all business activities. Furthermost the free zones like DMCC, JAFZA, DAFZA, RAKEZ, etc has made IFRS mandatory for companies registered with them.
Along with this, it is mandatory for the companies which are listed either in the Abu Dhabi Securities Exchange (ADX), Dubai Financial Market (DFM), or NASDAQ Dubai (formerly known as DIFX) to prepare all the accounting documents and records according to IFRS.
Advantages of Adopting International Financial Reporting Standards (IFRS)
This reporting standard is utilized by almost 90 countries for maintaining all their accounting details. In these countries, it is mandatory to prepare all the documents of the company according to the guidelines of International Financial Reporting Standards (IFRS) else the company may have to bear the consequences. The adoption of IFRS is very rewarding and has many benefits for the companies, such as:
- The IFRS help in generating timely and more accurate financial statement information. The accounting information provided by the company following the International Financial Reporting Standard. As the accounting information will be easy to understand even by an accountant in a different part of the world, a company will benefit by getting more investment and foreign help.
- As IFRS is used in many countries, it is very easy for the management of a foreign company to understand the financial situation of business located in a different country. this increased understanding will help in easy communication and also the passage of ideas and advice regarding various business topics.
- The best part about IFRS is that if a business used this accounting standard to create its accounting records, it can be easily understood by people. This means that investors and shareholders can make informed decisions.
- All the accounting data prepared according to IFRS are easy to understand and very transparent. This means that the business can attract more investors and shareholders.
- IFRS is considered a very accurate accounting standard and it is believed that by following IFRS the management can understand the true worth of the business.
- The International Financial Reporting Standard is designed in such a way that all the accounting documents are easy to comprehend making the process of Tax and VAT filing very easy.
- As this accounting standard is widely used all over the globe, it is easier to conduct international transactions. Also if all the countries use IFRS then it will be easier to create a central authority that will govern all business matter all over the world.
With so many benefits of the International Financial Reporting Standard, businesses tend to adopt such accounting standards early on in the business.
We can see that it is mandatory for a business in the United Arab Emirates, either new or a developing one, to adopt the International Financial Reporting Standard. If these standards are not followed, then the business will have to pay hefty fines and may even lead to the liquidation of the company. Thus you should always avail of the services of such a financial firm that follows the required accounting standard and also will provide various services such as Accounting Services, Audit Services, Tax, and VAT-related Services, etc.
JAXA Chartered Accountants will take care of all the financial requirements of your company and will prepare all the financial records of a company according to IFRS. To know more about the services provided by JAXA Chartered Accountants, Contact Us. We will be happy to help.