Consistent and comparable financial information is the crux of accounting for businesses. Accounting standards have always posed challenges to cross-border investments and to companies that wish to expand their services overseas. “ One global financial reporting network”, that promotes harmonization of accounting standards can help investors in formulating better investment decisions on time. This is made possible with the International Financial Reporting Standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB).
For understanding the requirement of a common global language for business affairs, numerous countries have decided to embrace IFRS, and the Kingdom of Saudi Arabia is no exception. The Saudi Organization for Certified Public Accountants (SOCPA) has adopted and transitioned to the new standard, which requires all companies except the one in the banking and insurance sectors to follow IFRS. Additional disclosure requirements were included in certain standards, to reflect sharia or local law. Considered as a significant milestone in the country’s economy, the implementation of IFRS will augment the quality of reporting along with boosting foreign direct investment.
Generally Accepted Accounting Principles (GAAP), which was widely used in the Kingdom of Saudi Arabia, IFRS gives a bigger picture of the financial reporting standards and promises greater transparency and clarity.