What Accounting Standards Must Be Used to Prepare Financial Statements in the UAE
The UAE offers world-class amenities to businesses. Companies in the UAE use modern infrastructure and follow business-friendly rules. These strong policies make the UAE a popular destination for business owners from around the globe. Entrepreneurs from every corner of the world now want to invest in the UAE. As more businesses come to the UAE, the demand for accounting services grows with them.
To keep business fair and transparent, UAE authorities make it mandatory for every business to follow standard accounting rules. These rules help companies stay organized and allow easy comparisons between different businesses. The main accounting standard in the UAE is the IFRS. This standard applies to every business in the UAE. In this article, you will learn about the accounting standards and the types of financial statements that must be used in the UAE.
The Accounting Standards in UAE
The UAE requires every registered business to prepare financial statements according to the IFRS (International Financial Reporting Standards). This rule helps create a fair system and makes financial reports easy to read and compare. Every company must use IFRS for its yearly accounts.
- IFRS brings uniformity.
- IFRS allows accurate calculation of profits and losses.
- IFRS lets businesses compare their results with other companies easily.
IFRS accounting standards give a clear path for companies to show their finances. When all companies use the same rules, investors and business partners can trust the reports. This helps UAE companies attract international investors. It also lets businesses compare themselves with firms from other countries.
All About IFRS (International Financial Reporting Standards)
IFRS is a set of standards accepted all over the world. It gives instructions on how to treat different transactions, assets, and liabilities. Every standard focuses on a special part of the business. For example, one standard covers leases, while another talks about mergers.
IFRS helps accountants understand the right way to record every business action. Each rule helps the business prepare accurate reports, which reflect true performance. With IFRS, companies:
- Learn the right treatment for every transaction.
- Make sure their reports match global standards.
- Can compare their performance with businesses outside the UAE.
When a business follows IFRS, it builds trust with investors, banks, and the government. The rules also make audits simple, so everyone can check if the company is following the law.
Financial Statements as per IFRS Standards
IFRS asks companies to prepare four main financial statements:
- Statement of Financial Position (Balance Sheet)
This statement shows the financial status of the company at one specific time. It lists assets, liabilities, and equity. IFRS provides rules for recording each type of asset and liability. The balance sheet helps business owners see what the company owns and owes. - Statement of Profit and Loss
This statement shows how much profit the business made during a certain period. It lists revenue, cost of goods sold, and expenses. IFRS tells companies to subtract costs and expenses from revenue to get net profit. This lets managers and owners check if the business is making money or losing it. - Statement of Changes in Equity
This statement tracks changes in the company’s equity over time. It shows the starting equity, changes during the year, and ending equity. Owners can see how their investments grew or changed. - Statement of Cash Flows
This statement explains how money moves in and out of the company. It shows if a business has enough cash to pay its bills. The cash flow statement uses data from the profit and loss statement. IFRS explains how to break down cash flow into operations, investing, and financing.
Key Points for Financial Statements:
- Follow IFRS for every financial report.
- Prepare four main statements each year.
- Use accurate and updated data.
- Keep records ready for audits or checks.
Why Use IFRS in the UAE?
Every business in the UAE benefits from using IFRS. Here are a few reasons:
- IFRS helps businesses meet legal requirements.
- It increases transparency and trust with investors.
- IFRS makes it easy to get loans from banks.
- Using IFRS can attract foreign investors.
- It prepares companies for audits and inspections.
IFRS is a global standard, so it opens doors for UAE businesses to work with companies in other countries. It’s not just about following rules—it’s about growing with confidence.
How Mubarak Al Ketbi (MAK) Auditing Can Help
Mubarak Al Ketbi (MAK) Auditing knows IFRS and UAE laws inside and out. Our expert team helps you prepare financial statements that follow every rule. We guide your business to keep accurate records, meet legal needs, and get ready for audits. We support companies of all sizes in the UAE. If you need advice, want to check your books, or wish to grow your business, our team is here for you. Remember, when it comes to accounting, an ounce of prevention is worth a pound of cure!
- For more information, visit our office at Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates.
- Contact or WhatsApp us at +971 50 276 2132.
