Globalization of the Financial Reporting
Donya-e-Eghtesad Daily Newspaper- March 5, 2016
Stock Exchange Team
Hooshyar Momayez Audit Firm's 8th annual seminar, titled "Auditing and the Coming Changes", was held while, as Amirhossein Narimany, HM's CEO, says, business owners are gradually getting out of the economic stagnation and are looking to expand international communications.
Amirhossein Narimany believes developing quality is more complicated than growth in quantity, and requires planning as well as constant effort by all people involved in accounting profession at individual and group level. Yesterday, HM was host to auditing and accounting people from all over the country to outline issues such as adoption of the IFRSs, Tax Reform and its effects on auditing and assurance services,evaluating major management styles and their effectiveness in company leadership, expectation gap and its associated challenges, fighting corruption and the new financial statements presentation format. Here is a brief reflection of what was said at the seminar.
Government's indetermination with its liabilities and assets
Member of the Audit Organization's board of executives, Dr. Bozorg Asl, remarked the government's insufficient information on their assets and liabilities, saying that currently the government does not clearly know how to tackle issues regarding its assets and liabilities, he continued by advising the government to convert from cash basis to accrual basis accounting to get access to more precise information which could help them towards making more accurate decisions. Hence, this is our and the next generations' responsibility to overcome these challenges said Bozorg Asl. He added that, to achieve this, though it is a very challenging and effortful process, the Audit Organization has started preparing the basis for a shift from cash basis accounting to accrual basis accounting in public sector standards from early 2015, since cash basis accounting does not provide the information needed for decision making purposes. He also highlighted another major transition currently going on at the Audit Organization, which is the adoption of the IFRSs by the listed companies that has heavily concerned the accounting and auditing society during the last 5 years. He believes that switching to IFRSs is more essential than ever, as the sanctions are now lifted and we need to prepare the foundations for communication and interaction and enable ourselves to compete at international levels.
"Currently, many of foreign companies, due to global market stagnation are trying to sell their products in our country, however, we are looking to inject foreign capitals into our economy which requires preparation of primary foundations for financial reporting, and as the accounting and auditing society we share part of this responsibility. "Foreign investors need financial information of high quality which is dependent on accurate and reliable audit and the quality of the financial information is determined by the standards. "Our national standards are very similar to international standards; however, there are some minor but important differences that could have great impacts on the performance of companies" said Dr. Bozorg Asl. "Foreign investors are looking to reduce the level of uncertainty. We could benefit from this, since this will reduce the expected return on their investment" he added. "Our main goal and objective is to reduce the cost of capital for local companies and our economy, and somehow we are willing to contribute to this process." Since March, 2011, we have been trying to prepare the basis for this process and increase our share of global markets.
Sanctions did not stop our activities
Dr. Bozorg Asl, remarked that despite the sanctions, the Audit Organization, as the standard setting body in Iran, had started translating the standards unofficially-since obtaining some licenses from international authorities was required, and added: "within tax field, the international standards need to be translated and some instructions on their application must be taught. Besides, some companies need to prepare the required systems and accordingly the necessary foundations to implement the international financial reporting standards." He continued: "the task started after passing and obtaining resolutions at Audit Organization's general meeting. Currently, we are mainly targeting the listed companies and we have been co-operating with the SEO in this regard. Besides, we have started translating the IFRSs and have made future plans for translation of the IFRSs' application guidelines that are more detailed and challenging such as issue 203. The SEO has also passed a resolution by which, it allows the voluntary application of the IFRSs by the listed companies since 2011, following by the mandatory application of the IFRSs starting from March 2016.
Application of IFRSs Has Been Confirmed for 2016
“IFRSs will be applied with a few minor adjustments in 2016” said Dr. Bozorg Asl, He also stressed that applying IFRSs might be delayed since we need to refer back to the previous fiscal periods while adopting the IFRSs for the first time, as it is compulsory to do so. Therefore, we are already behind in this regard, hence it will be a very expensive process. He has also criticized the local companies for not preparing the necessary foundations for adoption of the IFRSs, even though there’s only a little time left until these standards must be applied, and there’s a high demand for reports under the IFRSs in international markets. "To keep up the pace with our international counterparts and stay competitive in the market, we need to prioritize education and training as long as IFRs are concerned" He continued. He also warned that, if we fail to adopt and apply the IFRSs, then we are going to have to outsource it with a considerably higher cost. Therefore, we need to take well-timed and necessary actions in terms of running constant and effective training and education as well as planning and execution of changes in our accounting and assurance approaches. At the moment 118 of our local accounting standards do match with the IFRSs or at least there are not any major differences, however, we do have major differences in tax, employees’ retirement planning and financial instruments. Bozorg Asl ended his speech by advising the local education and training bodies to only focus on the existing financial instruments while educating and training local students, and do not spend time on financial instruments that do not exist in Iran such as treasury stock and bonds.
Evaluation of Audit Effectiveness in Tax Collection Process
Tehran’s VAT department's General Manager, Farshid Freydooni, was among the speakers at HM’s latest seminar, "Auditing and the Coming Changes", and, considering the recent changes in tax regulations and its effects on auditing and assurance services, he believes one of the most important recent adjustments made in tax regulations is the tax audit and the actions taken by the Tax Administration towards adjustment of the article 272 of the Direct Tax Act as required by the IACPA.
Farshid Freydooni has continued; our tax system has been influenced by our auditing system for the last 50 years and, these effects have been positive and with full awareness over the whole process. He added that, Adjustments in tax regulations are in line with changes in the society, economy, and politics, throughout the world and there is no other way to it, however the strategy that governments implement towards it, and how they approach it in deferent sections is what matters the most. According to Farshid Freydooni "The recent adjustments in tax regulations are the result of effort put into work by the Tax Organization over a decade to execute a comprehensive tax planning, and is the outcome of a tax system that helps towards implementation and execution of the tax reform."Source
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