Site Loader
Rock Street, San Francisco

Accounting standards and theirsystems have been mutating for years right from the initial discovery ofaccounting, which originated in the Middle East. Considering the earliestrecords of accounting were discovered in the Middle East, analysing andevaluating the accounting systems and standards of Egypt is crucial as thecountry has one of the biggest economies in the Middle East as well asundergoing major development.

Egypt has also developed its own Egyptianaccounting standard known as the Egyptian Financial Supervisory Authority(EFSA).  Many factors areresponsible for the viability of an accounting system where changes may have tobe made over a course of years to reassure efficiency. The nature of anaccounting system consists of and manages expenses, invoices and funding. Byimplementing a secure and efficient accounting system, the ability to monitorincome, invoices, expenses, funding and accounts payable is increased. Thissimultaneously enables the efficiency of the statistical reports for themanagement and stakeholders to make any sort of decision regarding theorganisation or even a country. Accounting systems are highly crucial formonitoring; however, it plays a part in profits which is the purpose of anorganisation. By enabling an efficient and secure monitoring system, themanagers and stakeholders will be able to decide whether any aspect of theorganisation will be profitable so that external factors such as tax can bedrawn.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

Having said that, theimportance of an accounting system relies on culture also. The culture as anation and type of society within a nation will most definitely have either anegative or positive impact on the accounting systems, affecting the decisionswhich are made entirely due to values which may be sentimental subconsciouslyas they may have been passed down for generations. This highlights manyaccounting risks and implications, however as a nation it will not matter untilaccounts are having to be globalised due to partnerships or coalitions. Regarding Egypt,Hofstede focuses on five cultural values by implementing the ideas of the fourdimensions of cultural values on Egypt, where it scored 80 for uncertaintyavoidance, 26 for individualism, 72 for power distance and 46 for masculinity(1983). High uncertainty avoidance, large power distance, low individualism inEgypt are features of a collectivist society and high masculinity wheretraditional gender roles are still the norm. Having high uncertainty avoidancehighlights that the people of Egypt tend to avoid risk rather than figure outhow to solve them if they are met with such issues, which could be identifiedas an issue in regard to accounting as it may affect the ethics as well as theefficiency. Although Egypt has its own Egyptian Accounting Standards(EAS), over the course of years it has been influenced by the InternationalFinancial Reporting Standards (IFRS) in accordance to the InternationalAccounting Standards Board (IASB) as Egypt has attempted to implement IFRSregulations as well as its own. The process of Egypt developing new standards inregard to IAS and IFRS has taken a number of years due to many problems Egypthad to overcome whilst creating their own standards.

Adapting to a IAS and IFRSwould have made the most sense as they are used globally, so the adaptation tothis would benefit them internationally alongside stakeholders, rather thansolemnly in the Middle East even though they are one of the biggest economiesin that sector of the world. One major issue preventing a much rapid and easieradaptation to IAS was due to the language barrier (World Bank, 2002), as theIAS was developed in English whilst the language spoken in Egypt widely wasArabic; where no translations of the IAS could be found in Arabic. Eventually inthe past century it has been possible to translate these standards due to thedevelopment in knowledge and ability to translate. Even though translation wasa hurdle, a complete conversion was not possible as there were cultural valueswhich must be taken into consideration as Egypt to this day, is still a countrydeveloping into modernity. Therefore, it is understandable as to why a completerevised set of standards are still not available (Dahawy et al.

, 2002).In 2006 a replacement for the 2002 EAS were revised, creatinga new set of thirty-five standards which are solely reflective of the IASB. However,four Egyptian Accounting Standards (1,10,19 and 20) were a part of the new setof standards of 2006 so that cultural values are not affected. EAS 1 – Presentation of financial statements.Under this Egyptian standard the profits from shares which arefor the employees and the directors are to be subtracted from retained earningsper share without decreasing the income figure on the income statement. However,by decreasing the income figure from the statement, the earnings per share whichare due to be distributed as dividends will be affected as they willsimultaneously be decreased; decreasing the worth of each share forstakeholders. However, the IAS would have charged these distributions as expenseswhich would be wiser, and management of expenses will be reasonable.

However,when taking a sum from the retained earnings which will be useful in the futurefor any debts incurred or reinvestments, the company is put in a position ofhigh risk of becoming bankrupt, as the reserve has decreased. Whereas chargingthese payments as expenses allows the management of these payments to becomesolid. EAS 10 – Fixed assets and depreciation. Deprecation is incurred over many years allowing assets to berevalued. However, under this Egyptian standard re-evaluation of the assetswhich may need to be depreciated are not allowed unless there are specialcircumstances that law and regulations approve, which is completely contrary tothe equivalent standard of IAS 16. This discontinues the depreciation for fixedassets which can lead to tax savings as well as maintaining residual value ofthe assets. EAS 19 – Disclosure in financial institutions.General provision for loans are created by decreasing theincome of the income statement, similarly to EAS 10 where the reserve forexpected liability or for the depreciated decreasing value of a fixed asset.

However, according to the IFRS 7, the general provisions are to be decreasedfrom the owner’s equity which decreases the capital as an expense, which wouldbe more efficient as the capital may be decreased, but the reserve for expectedand unexpected liabilities will remain untouched. This also comes down to thedifference between poor and good management of funds to keep the businessviable and profitable.  EAS 20 – Leasing. The party who owns the property which is being leased keepsthe asset in books and depreciates it whereas the party leasing the propertyconsiders the rental payment as an expense. This is also once again thecomplete opposite to IFRS 17.


Post Author: admin


I'm Eric!

Would you like to get a custom essay? How about receiving a customized one?

Check it out