DubaiAbuDhabi

7 Chapter Accounting

    • Accounting system

      In Dubai and Abu Dhabi, accounting and disclosure rules are set by federal law applicable to all seven emirates. It is stipulated mainly by Federal Law No. 18 Commercial Transactions Law (Commercial Transaction Law), Federal Law No. 8 Commercial Companies Law (Commercial Company Law). In addition, the company listed on the stock exchanges is subject to the disclosure of certain information with the application of Federal Law No. 4 Concerning the Emirates Securities and Commodities Authority and Market (Securities and Exchange Act). In addition to these federal laws, there are cases where regulations concerning accounting and disclosure are stipulated for each emirate country and free zone, and the company is obliged to obey these rules.
      Dubai / Abu Dhabi does not have its own accounting standard, but when a listed company conducts accounting processing, it has an obligation to comply with international accounting standards.
      Non-listed companies have no legal obligation to comply with international accounting standards, but most companies adopt international accounting standards.
      Below, we will look at the accounting system of Dubai and Abu Dhabi, centering on commercial transaction law, commercial company law, securities trading law.
       
      Post period
      The period stipulated by the articles of incorporation is the fiscal period of the company. Normally, the calendar year of January to December is set as the accounting period.
       
      Accounting book
      In Dubai and Abu Dhabi, all companies are required to prepare a journal and general ledger and record daily transactions (Article 26 of the Commercial Transactions Act). Recording can also be done using electronic media (Article 38).
      In addition, evidence documents which became the basis of accounting books and records must be kept for at least 5 years (Articles 30, 31).
       

    • Accounting standard

      ■ Changes in accounting standards
      Dubai / Abu Dhabi does not have its own accounting standards, and accounting processing has been processed according to general accounting practices in the past. However, in 1999, the UAE Central Bank asked banks, financial institutions and investment companies within the UAE to report performance in accordance with International Accounting Standards (then IAS), so UAE adopted International Accounting Standards Mind of mind grew. And now, the international accounting standards are effectively the accounting standards adopted by most companies as the accounting standard of their country in Dubai and Abu Dhabi.
       
      ■ Applicable to International Accounting Standards
      Abu Dhabi Stock Exchange (ADX), Dubai Financial Market (DFM) and Nasdaq Dubai, the major stock exchanges in UAE, require financial reporting in compliance with International Accounting Standards for all listed companies.
      For non-listed companies, there is no legal obligation to apply international accounting standards. However, certain free zones such as Dubai International Financial Center (DIFC) are excluded. However, even in unlisted companies, international accounting standards are accounting standards adopted by most companies.
      Companies that are unlisted companies and do not adopt international accounting standards will be accounted for in accordance with general accounting practices.

    • Disclosure system

      ■ Reporting obligation at shareholders meeting
      Public companies (Public Joint Stock Company), limited liability company (LLC), etc., it is necessary to submit profit and loss statement, balance sheet, etc. at the annual general meeting of shareholders and obtain approval of shareholders
      (Article 124, 216, 246, 268 of the Companies Act).
      Directors must prepare an income statement and balance sheet one month before the general meeting of shareholders (in the case of a limited liability company, within three months after the end of the accounting period), the income statement and the balance sheet must be prepared (Article 191, 216, 238, 263). The income statement and the balance sheet are audited by the corporate auditors (for the accounting auditor, see "Audit System" in the next section).
       
      ■ Right to view accounting books
      When approval is obtained at the Board of Directors or the general meeting of shareholders, the shareholders have the right to request the company to view the accounting books and their evidenced materials (Article 70 etc.).
       
      ■ Information disclosure obligation in listed companies
      Listed companies are obliged to publicly disclose information that may affect the stock price in a timely manner and make it available (Securities Exchange Act 34). Also, it is not permitted to publicly disclose false information that can mislead investors' decisions, nor to intentionally disclose information for the benefit of individuals (Articles 36 and 37).
      Those who violate these rules are subject to penalties of imprisonment of 3 months or more and 3 years or less, a fine of not less than 100,000 dirham or more and not more than 1 million dirham, or both penalties (Article 41).

    • Audit system

      If we leave the company's accounting treatment to the autonomy of management, there is a doubt that we may intentionally operate accounting information in order to better show the company's business condition. Also, if there is doubt about accounting information published by the company, if smooth economic transactions are hindered and the company has many stakeholders, the impact on society as a whole will be significant. Therefore, companies that adopt a certain form of establishment, such as a public company or a limited liability company, are obliged by the Corporate Law to secure the appropriateness of accounting information to be disclosed by receiving accounting audits by accounting experts It is.
       
      ■ Companies to be audited
      Companies that adopt a certain form of establishment such as a public company or a limited liability company shall appoint one or more accounting auditors at the annual general meeting of shareholders (Article 144, 216, 253, 270 of the Companies Act) I have to undergo an accounting audit.
      Since listed companies are required to submit financial statements such as balance sheets and income statements that were audited by certified public accountants within one month after the end of the accounting term (Article 12 of the Securities and Exchange Act) , Listed companies also have an obligation to undergo accounting audits.
       
      ■ Requirements of the Accounting Auditor
      Because auditing the appropriateness of accounting requires certain knowledge and ability, the accounting auditor needs to be a registered person as a certified public accountant (Article 145, paragraph 1 of the Companies Act). In addition, in order to ensure the independence of the accounting auditor, the accounting auditor can not participate in the management, and those who are related to a corporate lawyer, investor, or director within four affinities, etc. are audited I can not become a person (Article 145 (2), 3).
       
      ■ Appointment / dismissal of accounting auditor
      You can appoint and dismiss accounting auditors at shareholders meeting (Article 124, 144, 216, 253, 270 of the Companies Act).
      Upon establishment of the company, the investor can appoint an accounting auditor until the first general meeting of shareholders is held (Article 144).
      The term of office of the accounting auditor is one year (Article 144).
       
      ■ Obligations and rights of the accounting auditor
      The accounting auditor is required to audit whether the income statement and balance sheet of the company is appropriate and summarize the results of the audit in the accounting audit report and report at the annual general meeting of shareholders. A copy of the accounting audit report prepared will also be sent to the Ministry of Finance and relevant authorities (Article 146 of the Companies Act).
      In the accounting audit report, the income statement prepared by the company, opinions on whether the balance sheet is appropriate or not, etc., must be stated. When there are two accounting auditors, accounting audit reports are prepared for each accounting auditor respectively. (Article 150).
      The accounting auditor is obligated to keep confidential about the matters that he / she knew about the business.
      The accounting auditor who violated the obligation of confidentiality is dismissed and it is responsible for compensating for the damages caused by the violation (Article 149).
      The accounting auditor is responsible for the truth of the accounting audit work and the accounting audit report created. In addition, the accounting auditor is responsible for compensating damages caused to the company in the event of a mistake in relation to the duties of the accounting auditor. If there are two or more accounting auditors, liability for damages will be the joint and multiple liability (Article 151).
      The accounting auditor has the right to inspect various accounting books and evidence materials necessary for conducting the audit and, if necessary, ask the related persons for explanation.
      In conducting audits, the accounting auditor can report to the Board of Directors if it receives interference or interference. Also, as a result of the report, if the Board does not support the duties of the accounting auditor, the accounting auditor can report to the Ministry of Finance and the relevant authorities and mention the issue at the shareholders meeting (Article 147) .
      In addition, the Accounting Auditor shall convene a General Meeting of Shareholders to discuss the matter in cases where the Board of Directors intends to conduct illegal acts or if matters deemed necessary for urgent action need to be taken You can do (Article 148).