On Monday, the Ministry of Investment issued an updated version for the auditing standards in Egypt, according to Minister of Investment Ashraf Salman, as part of the government’s efforts to attract more investments.
The minister stated that, since the 1990s, Egypt has been committed to applying the auditing and financial supervision standards. The latest update for these standards was issued in 2006, which required amendments to these standards to be in line with the international standards and the developments in the world.
“Recently, many events took place on the international economic level. These standards, thus, need necessary updates to be in line with the international standards. These standards have changed as per the economic changes, the technical as well as scientific advancement, employees’ level of work, and the auditing system,” said Salman.
In a statement by the ministry on Monday, the minister stated that some of the most significant amendments in the standard include adding a new list to the financial lists, called the “comprehensive income list” and cancelling the “re-evaluation model” for fixed assets.
Amendments also included adding an extension to the standard revenues to clarify revenues for developers and their difference from established contracts, as well as cancelling the standard treatment for loan costs.
Within the amendments, the standards for consolidated financial statements were separated from the independent financial statements. They also included the exclusion of using copyrights in the independent financial statements, while cancelling the auditing standard in banks and the fair value in real estate investments.
Amendments also included adding several examples for calculating the earnings per share, especially in regards to the diluted share of the earnings per share, while cancelling “re-evaluation model” for intangible assets.
In the amendments, the financial instruments standard was simplified, while adding practical examples with regards to hedge accounting. Standards of “ownership stakes in joint ventures” were cancelled and replaced with “joint arrangements” standards; the “sectoral reports” were also cancelled and replaced with the “operating sectors”.
“Applying the new standards will give investors a positive impression and encourage international corporations to enter and invest in Egypt,” said Salman. He explained that applying the standards on companies is important for developing the corporate sector and the investments system, not only for listed and joint stock companies, but also small and medium-sized enterprises.
Salman added that the Egyptian auditing standards were simplified for small and medium-sized enterprises, and they were also exempted from some standards, such as the earnings per share, periodic financial statements, sectoral reports, and special treatment for assets held for sale.
This is in addition to simplifying many of the principles of recognition and measurement in the full standards, resulting in a better ranking for Egypt in reports by international evaluation entities specialised in small and medium enterprises.
“A permanent committee will be developed, comprised of the Egyptian Financial Supervisory Authority (EFSA), the Egyptian Society for Accountants and Auditors (ESAA), and the Central Auditing Organisation (CAO) to follow up on changes and develop, modernise, simplify and explain the accounting and auditing standards,” said Salman. He added that this would make the Egyptian market more attractive for international capital and corporations.
Hazem Hassan, head of the ESAA, pointed out that applying these standards will raise the quality of financial statements of the companies as a result of better disclosure and transparency.
“The new standards will help those who are interested in dealing with corporations; whether investors, creditors, or supervisory authorities, to understand and analyse these statements and make economic and financial decisions on proper bases,” said Hassan.
Hassan also noted that using the new standards will help international investors in due auditing of companies operating in Egypt, which encourages investment, thus contributing to the success of the Egyptian capital market.
According to Hassan, the standards contribute significantly to the application of the principles of corporate governance, which in turn results in increasing the efficiency of companies and raising their performance, and hence the performance of the economy as a whole.
Source: Daily News Egypt