EG Chapter (02) - The Development of The Egyptian

Accounting Standards, Are They Different From IFRS?

1- Until Year 1951

2- During 1960’s
3- After 1973 war
4- During 1990’s
5- Egyptian Accounting Standards (1997-2002)
6- Egyptian Accounting Standards (2002-2010)
7- Egyptian Accounting Standards (2015)
8- Deviations from IFRS’s
9- Conclusion

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 Accounting and Reporting was according to the GAAP, but practioners
and Bookkeepers were not in full agreement about GAAP.

 Until 1951 Foreigners were practicing auditing in Egypt.

1- Until  Law 133/1951 Allowed Individual Natural Egyptians only to
1951
perform the Audit Profession in Egypt for Private Sector
Companies established under the Law 26 for 1954.

 The Egyptian Government nationalized all banks and most

of large business manufacturing, construction & trading
companies working in Egypt.

 The Nationalization & the rapid expansion of the Public

Sector with the movement towards Economic Management
based on Central Planning has resulted in considering the
2- During Central Auditing Organization (CAO).
1960’s
 A Unified Accounting System (UAS) was designed to be
applied by all public sector entities and state owned
companies. UAS objective was to make the comparability
of the financial statements more meaningful, and to help in
the preparation of national income information.

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3- After  After the 1973 war, the Egyptian government has started
the 1973 the liberalization of the Egyptian economy and started the
War open door policy to encourage private sector companies to
be established and to encourage foreign investments to
come and to be invested in Egypt.

 “The economic liberalization towards guided free market

economy in the 1990’s involved the reactivation of the
“Egyptian Stock Exchange Market” in 1995, and a
4-During privatization program.
1990’s
 The shrinkage of the role of the public sector companies
and the large increase in the role of private sector listed
companies has created the need for changes and reforms in
the accounting systems.

 The Egyptian government as well as the Egyptian Society

of Accountants & Auditors has co-operated on the process
of setting or deciding on the accounting standards to be
enforced for application by all listed companies. The
choice was between two options:
5-EAS
- Adopt IAS as they are, or
(1997-
2002)
- Set Egyptian Local Standards in compliance with IAS
taking local and legal issues into consideration EAS’s
The second option was chosen

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  Ministerial decree was issued in October 1997 obligating
all listed companies to comply with the new EAS’s (19
standards) in preparing and disclosing their financial
statements .

 The same procedures have been followed to issue the new

5-EAS version of EAS’s by a ministerial decree in 2002 obligating
(1997-
all listed companies to comply with the new EAS’s in
2002)
preparing their financial.

 Capital Market Authority (CMA) was reviewing the annual

and the periodic financial statements of all listed
companies to make sure that they are complying with
EAS’s. The intention was to enhance the quality of
information disclosed by listed companies.

- The new Egyptian government that took office in June 2004

set a major agenda for macroeconomic and structural reform
and modernization.

6-EAS
- One of the lessons learned in the process of privatization of
(2002- state-owned enterprises is that because the financial
2010) statements of these enterprises were prepared according to the
“Unified Accounting System”, investors who were interested
in applying for the acquisition of such enterprises were
preparing another set of financial statements for the same
enterprises according to the IFRS.

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 Therefore, it was necessary to use one set of Accounting
Standards to be applied by all firms (Public & Private Sector).

The chairman of the CAO

new ministerial decree for
has also issued decree in
new accounting standards
2006 to use the same set of
applied by all listed
standards as
companies when preparing
complementary to the UAS
their financial statements
when preparing financial
for the periods starting Jan.
statements for the years
1, 2007.
starting 2007/2008.

 Due to the changes in IFRS, the Egyptian government and the

ESAA (Egyptian Society of Accountants and Auditors) have
started to develop the existing EAS’s (Egyptian Accounting
Standards) and finalized preparing a set of EAS’s that was
7-EAS
issued by the Minister of Investment.
(2015)

 The Minister of Investment has issued ministerial decree

no.110/2015 to issue new EAS’s to be applied starting from
Jan. 1, 2016. EAS’s include 39 standards, in addition to a
Framework of Preparing and Issuing Financial Statements

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 (8) Deviations from IFRSs

EAS IAS
1 Under EAS1 “Preparation of Financial Under (IAS1) dividends will be
Statements”, Dividends to Employees & Board recorded as an expense in the income
members are not charged as expense to income statement
statement but recorded as dividends, but it will
reduce R.E. and equity in statement of financial
position

Therefore, the income figure and EPS will differ under the 2 standards .

2 Under EAS10 “Fixed Assets & Their Under (IAS16) “Property, Plant &
Depreciation”, historical cost model is used Equipment” firms have the option to use
historical cost model or revaluation
model.
“EAS20 Leases” cannot be different from Law IAS 17 will differentiate between
95/1995, As if it is an operating lease. Egyptian operating lease and financing lease
Law no. 95/1995 regulating leasing activities
considering leased assets as owned by the lessor
and the lessor would depreciate leased assets and
treats lease Payments as Revenues to the lessor &
as expenses to the lessee.

“EAS19” Disclosures in the Financial Statements IAS30 no longer exists and is replaced
of Banks and similar financial institutions. The by IFRS
Central Bank of Egypt Regulations has been
changed to comply with IFRS.

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Examples of questions on this chapter:
1- Explain briefly how EAS have been developed.
2- What are the main differences or deviations between EAS and IFRS.
Or you may be asked about one of the deviations in details and how it
affects the accounting treatments. For example EAS 22 .
3- Discuss the Unified Accounting System.