IMPLEMENTATION OF INTERNATIONAL ACCOUNTING STANDARDS IN DEVELOPING COUNTRIES

Abstract

The development of globalized business practices such as international trade and global investments increases the demand for uniform processes. Globally accepted standards are one of the mechanisms that develop confidence within investors as to the financial credibility and governance to enable them to make optimal investment decisions thus enhancing their existence in a region. Nevertheless, beside the big proposed benefits of implementing international standards, the cultural uniqueness of developing countries and emerging economies is threatened by the introduced ideologies and technologies. The problem of the research arises with the challenge facing UAE in implementing international accounting standards and adapting the operational structure and culture to the western oriented standards. The objective of the research is to explore the developing matrix of the international accounting standards and the acceptance of those standards by UAE. It aims towards scrutinizing the implementation of international standards and the benefits reflected over on the financial reporting structure and governance system in the UAE. The key questions of the research include: To what extent do the accounting standards meet the requirement of the UAE? What are the forces driving to the implementation of the international accounting standards? What are the practical and social imperatives for the sound implantation of Globally Harmonized Accounting Standards? What is the leverage offered by implementation of International Accounting Standards to financial reporting structure and data quality? The research hypothesis states: International accounting standards don’t address the cultural and• ideological differences. The Business community synergy supports the development and• implementation of International Accounting Standards. Implementation of International Accounting standards enhances the• quality of Financial Reporting and raises corporate creditability and investments prospective. Implementation of International Accounting standards strengthen• corporate financial architecture and reduce the risk of financial market crises, together with their associated negative economic impacts The research is a case study of the United Arab Emirates. The resemblance between UAE and MENA region countries proposes a common benefiting of the outcome of the study. The study involves the input of a representative sample of the key parties involved in the standards implementation process mainly regulators from the Ministry vii of Finance and Abu Dhabi Securities and commodities Authorities, accounting firms and financial reports filers. It was found that the implementing of International Accounting Standards promotes transparent, comparable and consistent financial information. It proves to be crucial to economic and financial development as it enables a systematic review and evaluation of the performance of a multinational company having subsidiaries and associates in various countries. It reduces the financial reporting costs for multinational companies when consolidating foreign financial reports and makes it easier for multinational companies and international accounting firms to transfer accounting personnel to other countries. The Implementation of International Accounting Standards in the UAE provides equal operating environment where no other country has superiority because of implementing IAS. The overall findings of the study suggest that while the adoption of IFRS is relatively simple, its implementation is not, and UAE faces particular challenges in making the implementation of IFRS a reliable, regulated process and not just an image. The UAE needs to build a clear concept and action plan for implementing IFRS, as it is an irreversible step in the direction of development. The UAE, in embracing globalization and adopting IFRS, will need to develop appropriate operational plans to overcome some cultural issues such as the culture of secrecy. To ensure compliance, it is necessary for UAE to establish and put into place an effective and independent framework for detecting and correcting non-compliances, frauds and manipulations related to the implementation of international accounting standards. Appropriate enforcement measures and sanctions should be set to assure compliance and to enhance governance process accompanied by a parallel incentive framework for complying parties. UAE enforcement measures needs to extend to cover SMEs and family businesses as those represent a considerable sector of the economy. The education and training of professionals on the accounting standards is a fundamental part in the implementation process, in the due course of UAE interest to raise the quality of financial information. This imposes a responsibility on the big accounting firms with their international experience to play a recognized role in equipping the human resources with the required knowledge. The UAE, GCC and the MENA region countries need to join hands form a unified body that enhances the communications with the International standard setters in order to contribute in building a global accounting standards scheme that recognizes the uniqueness of different jurisdictions while developing the Standards, such as the Sharia laws and Sharia Finance in Islamic countries. The international financial bodies and the IASB might consider joint plans to promote the implementation of international accounting standards by offering and communicating incentives to complying countries