Egypt development in accounting standards

This move will provide all stakeholders both national and international with homogenous information that is comparable and reliable (Ashok Kumar, 2014). Task One: Nature of Accounting System Egypt uses uniform accounting system as the means for processing and presenting financial information. Its main feature is confidentiality influencing the type of information contained in annual reports. It was introduced in 1966 after which Egyptian accounting standards were introduced in 1990(central accounting agency (CAA), 1976). Under this system public sector companies were not obliged to publish their annual reports. Task Two: Divergence Egyptian accounting standards (EAS) differ from IFRS in four areas. EAS 1 is associated with presentation of financial statements. It desires apportionment of profits to employees and board of directors be decreased from retained earnings without decreasing the income figure in the income statement.

Proportionately affecting earnings per share. This in turn has effect in calculating price of a share and share valuation ratios. The Lessor should recognize the finance income based on a pattern reflecting, constant periodic return on the net investment outstanding in respect of the finance lease. At the beginning of the lease term, lessees recognize finance leases as assets and liabilities in the balance sheet at amounts equal to Fair value of the leased asset at the inception of lease or if lower, present value of minimum lease rental covers substantially the initial fair value of the leased asset from the lessee point of view. Task Three: Major Issues to Stakeholders Compatibility of accounting norms emanates from incomparability of financial statements.

Rational, acceptable and proportionate processing of financial information is to enhance trade and investments. Therefore compliance with such standards reduces information asymmetry thus its better measurement. This therefore also has an effect on financing expense since it translates to external credit rationing or paying high interest which reduces investors’ returns. In case of multinationals’ it might create the need for each subsidiary two sets of annual reports. This is not only costly but denies the group to have a uniform accounting language which is a challenge to management reporting and decision making. This becomes worse if the parent company is incorporated in Egypt and Egyptian pound is the operational currency for presentation of its financial statements. Lastly the investors got to worry because of the divergence since it results to poor communication to stakeholders which they are part of.