Accounting Practices and Harmonisation:
A Study in India and UAE


By

Dr. Namrata Gupta
Chartered Accountant
Dubai
 


INTRODUCTION:

As India's ties with UAE get better it is important to understand about business system in the region of Oil. While talking about the business system, accounting comes as an indispensable function. Unfortunately few studies have been carried out to understand the accounting system in UAE. Another aspect worth for research is the type of opinion stakeholders have to harmonize the national accounting standards with international accounting standards. Even after several years of trade and people exchange sufficient information is not available about differences regarding accounting system and harmonization. One of the best books in comparative accounting by Nobes (Pearson) does not carry even a single section about accounting systems of even a single emirates in UAE.

OBJECTIVES

Keeping this in view research about the difference in accounting practices and opinion about harmonization in banking companies of India and UAE was conducted. The objectives of the study were to
analyze the different accounting practices in banking companies of India & UAE, study the issues responsible for differences in accounting practices and evaluate the implication of harmonization in accounting practices on various stakeholders of business.

RESEARCH METHODOLOGY

The data sources used have been both primary and secondary. Annual reports for years 2000 to 2004, websites, other literature of 5 banks each in UAE and India were analyzed. A sample of 340 Bank employees, Government officials, Shareholders and Potential FDI investors were administered self-designed questionnaire. The hypothesis testing was done using chi-square test and percentage analysis.

RESULTS

The results of study are also graphically illustrated. It was concluded that o
n overall basis there are not much differences between accounting practices in UAE and Indian banks. It is more because of the fact that both are coming close to IAS every year. The difference between accounting practices in UAE and Indian banks were higher in Year 2000 compared to 2004. However significant accounting differences exist in case of Islamic banking. This is more because of nature of Islamic banking to not consider payment or receipt of interest. Even though the differences are not much, the disclosures are better in Indian banks. There are no mandatory requirements in UAE banks for implementing accounting standards. It was also found that the non-existence of regulatory authorities in UAE (like ICAI in India) might create problems in long run. Regarding harmonization it is concluded that comparatively UAE employees are keener to have harmonization of accounting standards for UAE banks. Potential FDI investors for both countries are equally keen to have harmonization of accounting standards for banks. This appears to be reasonable, as it shall help them to manage investments and operations better. Comparatively UAE employees are keener to have harmonization of accounting standards for UAE banks. Further on overall basis, stakeholders of UAE are keener to have harmonization of accounting standards for UAE banks

REFERENCES:

1. Abdallah, A., 1987. 'Islamic banking', Journal of Islamic Banking and Finance, January-March, 4(1): 31-56.

2. Abdel-Magib, M.F., 1981. 'Theory of Islamic banks: accounting implications', International Journal of Accounting, Fall: 78-102.

3. Ahmad, Sheikh Mahmud, l952. Economics of Islam, Lahore :19-67

4. Al-Arabi, Mohammad Abdullah, l966. 'Contemporary banking transactions and Islam's views thereon', Islamic Review, London, May l966: l0-l6.

5. Belverd E. Needles, Powers Marian, Susan Crosson : Principles of Accounting, (August 2001): Houghton Miffin college

6. Bruyne, D.De., Global Standards: A tower of Babel ? Financial Executive, Vol. 54, pp. 30-37, February 1980
 


Dr. Namrata Gupta
Chartered Accountant
Dubai
 

Source: E-mail March 28, 2008

 

        

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