Adopting IFRS in the UAE, What Changes in Practice

Who this applies to

Companies whose books grew out of a bookkeeping package with a default chart of accounts, and whose policies were never chosen by anyone.

That is more UAE SMEs than the profession likes to admit. The books are not wrong exactly. They were just never set on a stated basis.

What changes first: the chart of accounts

Most transitions start here, and it is unglamorous.

Accounts get grouped so the statements can actually be produced. Assets split between current and non-current. Related party balances separated from trade balances. Director transactions pulled out of general expenses.

Nothing about the business changes. What changes is that the numbers can now be presented.

Then: the policies you have to actually choose

Five decisions, each of which moves your reported profit.

1. When you recognise revenue, particularly where work spans the year end.
2. Depreciation method and useful lives for fixed assets.
3. Whether leases sit on the balance sheet.
4. How you provide against doubtful receivables.
5. Whether a director or related party balance is a loan, and on what terms.

Write these down. An accounting policy note that says what you actually do is worth more than one copied from a template.

Then: the opening balance sheet

The transition itself.

You restate your opening position onto the new basis. Some balances move. Some appear that were never recognised. Some disappear.

This is the moment the old receivables nobody chased get written off, and the fixed assets that no longer exist get removed.

Expect the opening equity figure to change. That is the point.

What it costs

Time, mostly in the first year. Your auditor will ask more questions during a transition than in a normal year, because they are testing the restatement as well as the period.

After the first year the ongoing cost is lower than what you had before, because year end stops being an argument about what the policy is.

Why it is now worth doing

Corporate Tax computes from accounting income under IFRS. If your accounts are not on a stated basis, your tax computation starts from a number you cannot defend.

Before June 2023 a loose basis had no cost outside your own management reporting. Now it has one.

The order to do it in

1. Decide the basis. Full IFRS or IFRS for SMEs.
2. Fix the chart of accounts.
3. Write the five policies above.
4. Restate the opening balance sheet.
5. Run one full year on the new basis before you judge it.

Doing step 4 before step 3 is the common mistake. You end up restating to a basis nobody has defined.

What this does not cover

Your free zone may set its own reporting requirements on top of the standards. Check your licence conditions.

If you want to know where you stand

Send us your trial balance and your last signed accounts. We can tell you what basis you are actually on, which is often not the one stated in the accounts.