4.

Accounting Principles and Reporting Requirements

Finbarr Sexton, Ernst & Young, Doha, Qatar

Introduction

Qatar is anxious to attract inward investment from foreign companies for major industrial projects in the country. The Qatari government is also conscious of the need for foreign investors to have confidence in its financial and regulatory reporting regimes. In the absence of national accounting principles and practices, the Ministry of Economy and Commerce has accepted the adoption of standards promulgated by the International Accounting Steindards Board (IASB) as national accounting standards. In 1995, the Ministry of Economy and Commerce issued instructions to all public compEuiies that annual financial statements should be drawn up in accordance with International Accounting Standards (IAS). A separate set of accounting standards and principles for banks was also approved by the Qatar Central Bank (QCB) in 1996. The standards issued by the QCB are similar to the pronouncements of the IASB.
Stock market influences on financial reporting

The Doha Securities Market (DSM) commenced operations in May 1997, listing the shares of Qatari public shareholding companies. At the end of 2(K)1, there were 21 companies listed on the exchange. DSM management has encouraged the need for increased transparency by requiring thefinancialstatements of quoted companies

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to become more widely available. It has also established clear guidelines for financial reporting by new entrants to the msirket and has teiken an active role in promoting improved standards of reporting by the companies already listed on the DSM. Statutory requirements All business enterprises are required to maintain adequate financial records. These need not be maintained in Arabic however. The accounting and reporting requirements for companies with limited liability (WLL) are established in the Commercial Companies Law, Law No. 11 of 1981. Income tax regulations specify that taxable income must be recorded in accordance with the accruals basis of accounting. They also specify that all original documents must be available for inspection and that the books and records must consist of a general ledger, inventory books and subsidiary ledgers appropriate to the business activity. The financial year for a company is the Gregorian year unless the company's articles of association provide otherwise. Financial reporting requirements Filing requirements For public shareholding companies, the audited balance sheet, income statement, directors' report and auditors' report must be submitted to the Ministry of Economy and Commerce within six months of the company's financial year end. A representative of the Ministry of Economy and Commerce is required to be present at the general assembly of shareholders. Similarly, audited financial statements of limited liability companies whose capital exceeds QR500,000 must be submitted to the Ministry of Economy and Commerce within 10 days of the general assembly meeting. All companies with limited liability are obliged to hold a general meeting at least once a year. Income tax regulations specify specific reporting requirements for taxpayers. In addition to the generally accepted reporting requirements, taxpayers are required to support audited financial statements with detailed analyses offixedassets and depreciation calculations.

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Interim financial reporting

All companies listed on the DSM are required to prepare halfyeEU-ly interim financial statements. Although there is no formal requirement to have these statements reviewed by independent accountants, most companies listed on the market have opted to have a review report issued on the interim accounts for shareholder protection. The interim financial statements must meet the requirements of IAS 34, Interim Financial Statements.
Disclosure requirements

The QCB regulates thefinancialreporting and disclosure requirements for commercial banks, exchange houses,financecompanies and investment companies operating in Qatar. These entities are required to furnish the QCB with monthly accounts in a specified format and to prepare comprehensive financial statements on an annual basis based on the QCB banking standards applicable to commercial banks and IAS for other financial services entities. The Ministry of Economy and Commerce has recommended the adoption of the standards promulgated by the IASB for other commercial entities operating in Qatar.
Audit requirements

All limited liability companies whose capital exceeds QR500,000 and all public shareholding companies should have auditors appointed by the general assembly every year. In addition, all final income tax declarations must be accompanied by financial statements audited by an auditor registered and based in Qatar. The auditor must be independent of the company being audited and must be registered in the Register of Auditors as provided by Law No. 7 of 1974 - Organization of the Auditing Profession, which regulates the auditing profession.
Auditors' responsibilities

A company's auditors must report on every set of accoimts laid before the company in general assembly. In their report, the auditors have to express their opinion on whether the balance sheet and profit and loss account present a feiir view of the finincid position, that they are in agreement with the actual state of affairs

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of the company and whether they contain all that is required by law and the company's articles of association. An auditor must also report whether the stocktaking procedure has been conducted according to established principles, whether regular accounts have been kept by the company, whether the auditor has obtained all the information which is considered necessary for the satisfactory performance of the auditor's duties, whether the information contained in the report of the board of directors is in agreement with the accounting records of the company and whether any violations of the provisions of law or of the articles have occurred during the financial year in a manner as to infiuence the activity or financial standing of the compeiny. Accounting profession There is no accounting body in Qatar that has primary responsibility for issuing pronouncements on professional ethics, by-laws and accounting and auditing standards. However, the Ministry of Economy and Commerce regulates the activities of audit firms in Qatar and maintains the Register of Auditors.