Muhammad Zeeshan Taqi

Accounting treatment of Leases, comparison between Full IFRS (IFRS16) vs IFRS for SMEs Standard #ifrs #leases #ifrs16 #smes #finance #accounting #financial #cfo #accountant

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IFRS Summary

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IFRS Summary

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Very interesting post! Tagging to maximize reach.

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To continue with my post on the challenges faced by CFOs/Finance teams in the GCC region around AR, AP, and reconciliation, & sharing a real example: A large family business in Qatar shared their experience. Despite investing in ERP systems, they are still caught in manual work: delayed payments, constant invoice tracking, and time-consuming reconciliation. They have a finance team of 8-10 people dedicated to this, spending hours each day on Excel sheets, using VLOOKUPs and macros to keep things in check. Multiple excel sheets moving around between departments. Their challenges include: - Payment delays and cash flow constraints impacting day-to-day operations. - Challenge of forecasting inward cash flow - No effective system for tracking or automating follow-ups. - No visibility into how or when the sales team follows up with clients. - No way to capture client feedback on payment delays. - Limited automation in reconciling incoming payments with generated invoices. These manual processes impacts cash flow. In the coming days, I will share more about these recurring issues (I.e challenges with corporate card, challenge once vendor makes the payments etc) and solutions that can ease the finance team’s load, allowing them to focus on strategic work rather than routine tasks.

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**Understanding Fair Value Under IFRS 13: Non-Financial Assets Demystified** Have you ever contemplated how to ascertain the fair value of a non-financial asset in accordance with IFRS 13? Here is a succinct overview: ### When Market Data is Available: The fair value of non-financial assets should represent their highest and best use, implying that market participants aim to maximise the asset's value. Key considerations for determining the highest and best use include: - Whether there are alternative uses for the asset, and - What the fair value would be if it were utilised differently It is generally presumed that the asset's current use represents its highest and best use unless proven otherwise. ### When Market Data is Not Available: IFRS 13 recommends three primary valuation methodologies: 1. **Market Approach:** Based on market prices of identical assets. 2. **Income Approach:** Discounting future cash flows. 3. **Cost Approach:** Reflecting replacement cost. No single method is preferred, necessitating significant professional judgement. Do you feel more confident in valuing non-financial assets now? Let us engage in a discussion on how you manage these valuations in your professional practice! 💼 📈✨ #AccountingTips #IFRS #StandardUpdate

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GAAP or IFRS? - Not a battle, just different "rules of the game"! Simply put, imagine that they are the "rules of the game" for companies when it comes to preparing financial statements. But each set of rules works in a different "arena"! 1. GAAP - The American Rules: - Stands for "Generally Accepted Accounting Principles," meaning the accounting principles generally accepted in the United States. - Characterized by its detailed nature and focus on rules and regulations. - Suitable for American companies or those listed on American stock exchanges. 2. IFRS - The International Standards: - Stands for "International Financial Reporting Standards." - Relies on general principles rather than strict rules. - Suitable for global companies or those dealing with international entities. So, why did something like IFRS emerge in the first place? In the past, each country had its own "rules of the game" for accounting, which caused a lot of confusion for investors and foreign entities dealing with companies from different countries. Therefore, the idea of unifying the "rules of the game" at the international level emerged, and IFRS became the common language among companies in many countries around the world. This has led to: - Ease of comparing the performance of companies from different countries. - Reduced costs of preparing financial statements for global companies. - Increased investor confidence in companies' financial statements. Some key differences between GAAP and IFRS: 1- Inventory Valuation: GAAP allows the LIFO (Last-In, First-Out) method for inventory valuation, while IFRS does not. 2- Revenue Recognition: IFRS applies a more comprehensive standard for revenue recognition than GAAP. 3- Provisions and Contingencies: IFRS requires the recognition of provisions and contingencies more conservatively than GAAP. Some of New standards in IFRS not found in GAAP: 1- IFRS 16 - Leases: Requires most leases to be recognized as assets and liabilities on companies' balance sheets, unlike GAAP, which allows some leases to be expensed as operating leases. 2- IFRS 9 - Financial Instruments: Provides a more comprehensive standard for the classification and measurement of financial instruments than GAAP. Choosing the right "rules of the game" depends on the nature of the company, its activities, and the entities it deals with.

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𝗘𝗕𝗜𝗧 𝘃𝘀. 𝗘𝗕𝗜𝗧𝗗𝗔: 𝗞𝗻𝗼𝘄 𝘁𝗵𝗲 𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲 Grab your high-res PDF at: (https://lnkd.in/dahRzQ42) 1️⃣ 𝗘𝗕𝗜𝗧 (𝗘𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗕𝗲𝗳𝗼𝗿𝗲 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗮𝗻𝗱 𝗧𝗮𝘅𝗲𝘀) → Focuses on a company's core profitability without financing effects. → Assesses operational efficiency and performance. → Operating profit excluding interest and taxes. → Common in capital-intensive industries. → Reflects profit from core operations. 2️⃣ 𝗘𝗕𝗜𝗧𝗗𝗔 (𝗘𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗕𝗲𝗳𝗼𝗿𝗲 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁, 𝗧𝗮𝘅𝗲𝘀, 𝗗𝗲𝗽𝗿𝗲𝗰𝗶𝗮𝘁𝗶𝗼𝗻, 𝗮𝗻𝗱 𝗔𝗺𝗼𝗿𝘁𝗶𝘇𝗮𝘁𝗶𝗼𝗻) → Evaluates cash-generating ability and overall performance. → Emphasizes cash-generating ability excluding non-cash expenses. → Popular in industries with high asset use and significant depreciation. → Operating performance including interest, taxes, depreciation, and amortization. → Provides a broader view of cash-generating ability excluding non-cash expenses. Understanding these metrics is crucial for assessing a company's financial performance. For personalized advice and consultations on leveraging these metrics for your financial strategies... Message me "Metrics" to collaborate and optimize your financial strategy. (Act now: Limited slots available for August 2024!) PS. Join 5,000 founders & finance pros at: thestartupfinance.com

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GAAP vs IFRS 1️⃣ Principles vs. Rules 🎯 IFRS is more principles-based, offering broad guidelines and allowing for interpretation. 🎯 US GAAP, on the other hand, is rules-based, providing detailed instructions and specific requirements. 2️⃣ Revenue Recognition: 🎯 Under IFRS, revenue recognition is guided by the principle of transferring control. 🎯 while US GAAP follows a detailed five-step model to determine when and how much revenue should be recognized. 3️⃣ Inventory Costing: 🎯 US GAAP allows Last In, First Out (LIFO) as a method for inventory costing, which can result in lower taxable income in times of rising prices. 🎯 IFRS prohibits LIFO, requiring companies to use methods like First In, First Out (FIFO) or weighted average cost. 4️⃣ Development Costs: 🎯 IFRS permits the capitalization of development costs when certain criteria are met. 🎯 whereas US GAAP generally requires these costs to be expensed as incurred. 5️⃣ Financial Statement Presentation 🎯 There are differences in the presentation of financial statements, 🎯 such as the classification of certain items and the terminology used. ✨️ For companies operating globally or considering international expansion, understanding these differences is essential for compliance and strategic decision-making. ✨️ Bridging these gaps often involves robust accounting practices and continuous learning. 👉 Are you navigating the complexities of GAAP and IFRS in your role? Share your experiences and insights below! The article via Mohamed Samir, CMA, DipIFR, CIA P l-ll ✅️ the book credit to EY hashtag #Accounting hashtag #Finance hashtag #USGAAP hashtag #IFRS hashtag #GlobalBusiness hashtag #FinancialReporting hashtag #gaap hashtag #ifrs

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The 13 main accounting principles If you work in Finance, you MUST know these principles. Why are they important? -They drive the IFRS, US GAAP and any other local GAAP -If a transaction does not comply with one of these rules, it's probably a mistake that needs to be corrected -Your control environment must be set up to respect these principles -You need to be able to explain them to the non finance people With the time and experience, these principles became like intuitions. Every time somebody proposes something not complying with these rules, I know there is a red flag. But it’s a lot to remember. This is why I have compiled them in one document. 1. Accrual Principle - Definition: Income and expenses are recorded when they occur, not when cash is exchanged - Example: You record revenue when you complete a service, not when you get paid 2. Conservatism Principle - Definition: Report expenses and liabilities as soon as possible, but revenues and assets only when you're sure about them - Example: You record a potential lawsuit as a loss, but don't record a potential future sale until it happens 3. Consistency Principle - Definition: Use the same accounting methods from year to year - Example: If you use straight-line depreciation one year, you keep using it for the same asset 4. Cost Principle - Definition: Record assets at their cost at the time of purchase, not at their current value - Example: You bought a machine for $5k, so you record it as $5k, even if it's worth $4k now 5. Economic Entity Principle - Definition: Keep personal and business finances separate 6. Full Disclosure Principle - Definition: Provide all necessary information in financial statements - Example: If your company has a lawsuit, it should be mentioned in your reports 7. Going Concern Principle - Definition: Assume the business will continue operating in the foreseeable future. - Example: You plan to pay off a long-term loan over several years, assuming your business will still exist 8. Matching Principle - Definition: Match expenses with the revenues they help to generate - Example: You record the cost of goods sold when the related sales revenue is recorded 9. Materiality Principle - Definition: Only report financial information that would change a decision maker's view - Example: A $50 expense isn't listed separately in a multimillion-dollar company's report 10. Monetary Unit Principle Record business transactions in a stable currency 11. Reliability Principle Only record things in the financial statements that you can prove 12. Revenue Recognition Principle - Definition: Record revenue when it's earned, not when received - Example: You record a sale when you deliver the product, not when you get paid 13. Time Period Principle Report financials for specific, regular periods, like annually or quarterly

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😧 UAE Introduces New Corporate Tax Regime ? Large multinationals will pay a minimum of 15% tax on the profits generated in the country, up from the current 9% ????????? The UAE is set to implement a new corporate tax regime, affecting large multinational enterprises (MNEs). -> Minimum Tax Rate: MNEs with global revenue exceeding €750 million will be subject to a minimum 15% tax rate. -> Effective Date: This new tax regime will come into effect for financial years starting on or after January 1, 2025. -> Global Alignment: This move aligns the UAE with the OECD's two-pillar solution, ensuring a fair and transparent tax system. This significant change will have implications for businesses operating in the UAE. It's crucial to assess its impact on your financial strategies and seek expert advice to navigate this new tax landscape. Disclaimer: Please seek a proper legal and tax advisor related to subjected information.

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What is the Relationship Between Financial Statements? The financial statements are comprised of the income statement, balance sheet, and statement of cash flows. These three statements are interrelated in several ways, as noted in the following bullet points: 🌟The net income figure in the income statement is added to the retained earnings line item in the balance sheet, which alters the amount of equity listed on the balance sheet. 🌟The net income figure also appears as a line item in the cash flows from operating activities section of the statement of cash flows. 🌟Changes in various line items in the balance sheet roll forward into the cash flow line items listed on the statement of cash flows. For example, an increase in the outstanding amount of a loan appears in both the liabilities section of the balance sheet (as an ongoing balance) and in the cash flows from financing activities section of the statement of cash flows (in the amount of the incremental change). 🌟The ending cash balance in the balance sheet also appears in the statement of cash flows. 🌟The purchase, sale, or other disposition of assets appears on both the balance sheet (as an asset reduction) and the income statement (as a gain or loss, if any).

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Bridging the Gap: Accounting Practices in Saudi Arabia vs. International Standards While international financial reporting standards (IFRS) are widely adopted globally, some countries, like Saudi Arabia, have their own nuances. Understanding these differences is crucial for companies operating in the Kingdom. The Foundation: IFRS and Saudi GAAP The International Financial Reporting Standards (IFRS) represent a set of globally recognized accounting principles that aim to create consistency and transparency in financial reporting. Many countries, including Saudi Arabia, have adopted IFRS as a foundation for their own accounting practices. However, Saudi Arabia also has its own Generally Accepted Accounting Principles (GAAP), known as Saudi GAAP. These principles are largely compliant with IFRS but include some key differences specific to the Saudi Arabian context. Key Differences to Consider Here are some of the main areas where Saudi GAAP diverges from IFRS: Zakat Accounting: Zakat is a religious tax levied on certain assets in Islam. Saudi GAAP requires companies to disclose their Zakat calculations and liabilities, which is not a requirement under IFRS. Islamic Finance: Islamic finance plays a significant role in the Saudi Arabian economy. Saudi GAAP offers specific guidance on accounting for Islamic financial instruments, such as Sukuk (Islamic bonds), which are not explicitly addressed in IFRS. Government Grants: The Saudi government often provides grants to businesses. Saudi GAAP has specific rules for recognizing and accounting for these grants, which may differ from IFRS treatment. Valuation: There can be slight variations in how certain assets, like inventories or property, plant, and equipment (PPE), are valued under Saudi GAAP compared to IFRS. Navigating the Landscape: Challenges and Solutions Companies operating in Saudi Arabia need to be aware of these differences to ensure their financial reporting is compliant with both IFRS and Saudi GAAP. Here's how to navigate this landscape: Seek Professional Guidance: Consulting with qualified accountants with expertise in both IFRS and Saudi GAAP is crucial. They can help companies interpret the regulations and ensure proper implementation. Maintain Strong Internal Controls: Having robust internal controls in place helps companies track transactions and ensure accurate financial reporting according to both sets of standards. Stay Updated: Regulatory environments can change, so staying updated on the latest IFRS pronouncements and any revisions to Saudi GAAP is essential. Conclusion While IFRS provides a strong foundation, understanding the specific requirements of Saudi GAAP is essential for companies operating in the Kingdom. By acknowledging the differences and taking necessary steps, businesses can ensure their financial reporting is accurate, compliant, and transparent.

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#ias23 #accountingstandards #fasb #capitalization #borrowingcosts #qualifyingasset IAS 23 - Borrowing costs Definition: - Borrowing costs are the costs that are directly attributable for the acquisition, construction, production of a qualifying asset - Borrowing costs include i) interest expense on loans ii) Amortization of discounts or premiums related to borrowings iii) Finance charges on finance lease - Usually, interest expense is expensed to P&L but there are special circumstances where interest cost is added back to the asset. Qualifying assets: [Which assets are to be capitalized?] - Those assets which are self-constructed and not purchased assets. - can be tangible or intangible (but not purchased) - The assets which take significant amount of time for intended use or sale - Significant time may be more than 6 months. Accounting treatment: - Borrowing costs relating to assets has to be capitalized - All those pre and post construction and sale of the asset expenses are to be expensed to P&L - When interest is paid Dr Interest expense, Cr Cash/Bank - When expense capitalized Dr NCA, Cr Cash/Bank Types of Borrowing costs: Funds borrowed specially: Refers to loan taken specially for construction of a particular asset Funds borrowed generally: Refers to when funds used out of multiple loans taken having different interest rates, weighted average of all the loans interest has to be considered as interest percentage for capitalization. - Interest income on unutilized funds: Net of interest expense of qualifying asset and Interest income earned out of unutilized funds should only be capitalized, same in case of Predevelopment period net of interest has to be expensed to P&L. Capitalization: [When capitalization has to be done?] - When expenditure for the asset is incurred - Borrowing cost are incurred - Activities that are necessary for the asset to its intended use or sale is in process. Suspension or cessation of capitalization: Suspension: When development is interrupted for a particular period due to strikes, etc., the cost incurred in that period has to be expensed to P&L. Cessation: When construction/development and activities relating to the asset is complete or ready to use or sold then costs cannot be capitalized, to be expensed. - Management tries to capitalize the costs in Balance sheet so that profit in P&L is not affected and to increase the performance of management but IFRS is very cautious about overstating the Balance sheet which is key to shareholders. Disclosure: - Entities must disclose amounts of borrowing costs - Capitalization rate used to determine the amount of borrowing costs eligible for capitalization.

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🎯 Balance Sheet Battleground: FACE-OFF (IFRS vs GAAP) Cash Flow Statement (Part 3/4) 🎇 Direct vs. Indirect Method: 🌏 IFRS: Encourages using the direct method for presenting cash flows from operating activities but allows the indirect method. 💰 GAAP: Allows both the direct and indirect methods but favors the indirect method. 🎇 Non-cash Transactions: 🌏 IFRS: Requires significant non-cash transactions to be disclosed in the notes to the financial statements. 💰 GAAP: Has similar disclosure requirements for non-cash transactions. Impact of these differences: These variations can lead to differences in how cash flows are presented and interpreted. For instance, classifying interest paid as a financing activity under IFRS could affect key ratios like the cash flow from operations to total debt ratio. Understanding these differences is crucial for analysts and investors when comparing the cash flow statements of companies reporting under IFRS and GAAP. 🔖 FACE-OFF (IFRS vs GAAP) 2/4 👉 https://lnkd.in/dwK39ZVn 🔖 FACE-OFF (IFRS vs GAAP) 1/4 👉 https://lnkd.in/dYhhB6uC 🔖 Want to understand the Free Cash Flow (FCF)? Hit the below link 👉 https://lnkd.in/d7Y4bQDX 🔖 Do you think that you know IAS 23 - Borrowing Cost! if so, read this to check the trick of it 👉 https://lnkd.in/dixpZ6g7 🔖 The key differences between IFRS vs GAAP 👉 https://lnkd.in/d-dUqizS 🔖 I have protected sheets of Excel, I forgot the password, No worries, Hit the below link so you can #hack the #passwords 👉 https://lnkd.in/dD6b88qb 🔖 Easy for you to prepare the cash flow BUT, don't know how to read/analyze! Check the below link 👉 https://lnkd.in/dQG2dMVw ♻️ 𝐋𝐢𝐤𝐞, 𝐂𝐨𝐦𝐦𝐞𝐧𝐭, 𝐑𝐞𝐩𝐨𝐬𝐭 if you found this useful and valuable! #budgeting #forecasting #planning #cma #finance #accounting #accountingtips #costing #cfo #chiefaccountant #financemanager #investments #strategy #cashflow #money #cashmanagement #profitandloss #financialstatements #balancesheet #analysis #management #innovation #technology #creativity #trading #price #business #Leadership

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"UAE Corporate Tax Registration: Deadline Approaching! 🕒 Ensure Timely Compliance by May 31, 2024 📝 Avoid Penalties and Protect Your Business Interests 🚫 Register Now and Maintain Regulatory Alignment 💼 Stay Proactive and Mitigate Potential Risks ⚠️" #UAECorporateTax #BusinessRegistration #DeadlineAlert"

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𝗔𝗰𝗰𝗼𝘂𝗻𝘁𝗶𝗻𝗴 & 𝗙𝗶𝗻𝗮𝗻𝗰𝗲 𝗣𝗲𝗿𝗶𝗼𝗱𝗶𝗰 𝗧𝗮𝗯𝗹𝗲 Grab your high-res PDF at: (https://lnkd.in/dfQAxgRM) 1️⃣ 𝗖𝘂𝗿𝗿𝗲𝗻𝘁 𝗔𝘀𝘀𝗲𝘁𝘀 (𝗖𝗮) → Cash, Accounts Receivable, Inventory, Prepaid Expenses, Short-term Investments. 2️⃣ 𝗡𝗼𝗻-𝗖𝘂𝗿𝗿𝗲𝗻𝘁 𝗔𝘀𝘀𝗲𝘁𝘀 (𝗡𝗖𝗮) → Property, Plant, Equipment (PPE), Intangible Assets, Investments. 3️⃣ 𝗖𝗼𝗺𝗺𝗼𝗻 𝗦𝘁𝗼𝗰𝗸 (𝗖𝘀) → Par Value of Shares Issued. 4️⃣ 𝗥𝗲𝘃𝗲𝗻𝘂𝗲 (𝗥𝗲𝘃) → Sales, Service Income, Interest Income. 5️⃣ 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗘𝘅𝗽𝗲𝗻𝘀𝗲𝘀 (𝗢𝗽𝗘𝘅) → Selling and Administrative Expenses. 6️⃣ 𝗥𝗲𝘁𝗮𝗶𝗻𝗲𝗱 𝗘𝗮𝗿𝗻𝗶𝗻𝗴𝘀 (𝗥𝗲) → Accumulated Profits or Losses. 7️⃣ 𝗘𝘅𝗽𝗲𝗻𝘀𝗲𝘀 (𝗘𝘅𝗽) → Cost of Goods Sold (COGS), Salaries and Wages, Rent, Utilities, Interest Expense. 8️⃣ 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗘𝘅𝗽𝗲𝗻𝘀𝗲𝘀 (𝗙𝗶𝗻𝗘𝘅) → Interest Expenses, Bank Charges. 9️⃣ 𝗔𝗱𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗣𝗮𝗶𝗱-𝗶𝗻 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 (𝗔𝗣𝗜𝗖) → Amount Received from Issuing Shares Above Par Value. 🔟 𝗗𝗶𝘃𝗶𝗱𝗲𝗻𝗱𝘀 (𝗗𝗶𝘃) → Distribution of Earnings to Shareholders. +More! Understanding these elements is crucial for mastering accounting and finance. For personalized advice and consultations on leveraging these concepts for your financial strategies... Message me "Finance" to collaborate and optimize your financial processes. First come, first served!

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