Accounting principles utilized in UAE - Essay Example

Accounting without doubt plays a critical role in the modern world.Accounting rules are prevalent and vary from region to region.In the modern commerce work, financial reporting has become the focal point has growth in commerce continues to skyrocket internationally One cannot ignore the fact that numerous factors such as social, economic and legal differences account for different standards that are vary across nations. However, there is a strong push towards a uniformed system of accounting methods in order to facilitate transactions and comparability of financial statement.

A uniform system of accounting strives to harmonize and enhance comparability of accounting principles (Lin, Z.J. and Liyan, W). International Accounting Standards is a set of accounting methods that contains numerous governing sectors. The main body is known as IASB, which puts down the guidelines for the regulations that are enforced through the IAS. While the United States operates under the GAAP, UAE chooses to follow a different path relating to accounting methods (Epstein, B.J. and Mirza).

GAAP is comprised of set of rules that accountants create and vary from nation to nation (Epstein, B.J. and Mirza). On the other hand, The Central Bank of UAE chooses to follow the International Accounting standards or (IAS) to accommodate its needs for finances. The economic model of UAE greatly differs from the US system; therefore, it is essential that UAE utilize a system that accommodates their need in commerce, trade, and revenue. The IAS is not only used in UAE but is also widespread in other Middle Eastern countries.

In fact, the Arab Society of Certified Accountants, which is composed of 22 nations, signed a petition which made IAS as the uniform method of standard for all the member countries. This point could be further elaborated as the head chairman of the counsel stated “We are confident, that IASC standards will enhance the economic strength of a region that has significant commercial and industrial sectors” (Sale 29). Surprisingly enough, the popularity of IAS extends far beyond Arab countries as even Australia has begun to implement the IAS regulations.

Canada, is also considering adopting the IAS standards along with former Soviet Union countries such as Moldova and Kazakhstan. In essence, the influence of IAS is reaching nationwide as London, Frankfurt, Zurich, Luxembourg, Thailand, Hong Kong, Amsterdam, Rome, and Malaysia are all considering implementing the IAS standards in their everyday accounting. Without a doubt, the IAS seems to be a better fit for UAE for several reasons. One of the key elements that UAE should continue to practice IAS standards is due to fact that IAS is a uniform standard that strives to harmonize accounting methods.

Clearly, UAE is becoming a “Makkah” for commerce and investors should be able to compare financial statements without the hassle of acknowledging which standards each nation is using (Kit 33). As corporations benefit from this uniform method of not having to create different financial statements for different standards, they can divert their attention to more important aspects such as reducing costs and being innovative in their business. As mentioned above, many other nations are following the IAS standards; so why choose a different type of method when other nations are implementing the same standards?

The main goal of the IAS is to formulate a standard that is globalized and to propagate their acceptance throughout the globe. Furthermore, the IAS is more diverse and better organized than any other international organizations. The IAS continues to enforce strict regulation as it sets statutory guidelines on framework for preparation and presentation. Moreover, the IASC has guidelines for issues that dominate the commerce world such as inventory, depreciations, earning per share, reporting loss and revenue, interest expense, consolidation, intangible assets, and other financial instruments.

Undeniably,