02 Oct 2016

Business Governance and Accounting guidelines in Oman: An Empirical learn on Practices



Lately, the Oman economic climate features encountered some reforms, leading to an even more market-oriented economic climate. Especially, the monetary impetus extended by the Sultanate of Oman had signaled the start of a positive trend. How big Oman industry has become a lot larger therefore the objectives of various worried events are also increasing, that can easily be pleased only by great Corporate Governance.

The importance of great Corporate Governance has additionally been more and more acknowledged by a for enhancing the businesses’ competition, better corporate overall performance and better relationship with stakeholders(1). In oman also the companies have actually obliged to reform their particular concepts of Governance, which is why, Oman organizations will now be required to make more fancy disclosures than have now been making hitherto. This necessiates to adhere to the consistent and appropriate accounting requirements, as the requirements lower discernment, discrepancy and enhances not just the degree of transparency in revealing of data with all the events worried but in addition reinforces the broader role the directors need to play for achieving Corporate targets amid challenges and adversities.

Here, the organization Governance is a voluntary, moral rule of business worried about the morals, ethics, values, variables, conduct and behavior of business and its own management. The corporate duty starts with the directors who’re your brain and soul of a strong.

The Board is expected to behave as conscience-keeper of corporate vision and mission, and develop the proper type of systems for organizational effectiveness and satisfaction of stakeholders. Therefore, the organization Governance is a system of accountability primarily directed towards shareholders in addition to maximizing the shareholders’ welfare(2), where the discussion on disclosure/ transparency dilemmas of Corporate Governance ultimately centres round the appropriate accounting requirements and their particular methods and dilemmas, as the application of accounting requirements give many self-confidence into the corporate management while making the disclosure far better and ensure the nice Corporate Governance to advertise a wholesome investment environment.

Therefore, the analysis of methods of accounting requirements is an important and relevant problem of great Corporate Governance in today’s environment, as the requirements are viewed as a technical response to necessitate better monetary accounting and reporting; or as an expression of a society’s altering objectives of corporate behavior and a vehicle in personal and governmental monitoring and control of the enterprise(3).


The old means of selective and conservative reporting is producing location to even more transparent and voluntary disclosures, in tune with all the altering times. There is no option to following by the corporate organizations of brand new requirements of accountability, where the accountability is largely a matter-of disclosure, of transparency, of describing a business’s tasks to those to who the business features responsibilities(4) in other words. the disclosure in quick, understandable and similar form, forms plainly the cornerstone for accountability, that can easily be provided as long as organizations adopt consistent accounting policies and reveal adequate information about the accounting requirements then followed. Therefore, accounting requirements make sure the comprehensive disclosure of corporate’s accountability, which can be regarded as a prime issue and a pre necessity once and for all Corporate Governance.

a study of methods of accounting requirements, and their particular dilemmas in Oman industry might help to comprehend the prevailing methods of accounting requirements, which often aid in creating the effective standard methods so as to guarantee great Corporate Governance ultimately causing a wholesome investment environment.

In this framework, an endeavor is manufactured right here to examine the accounting requirements and their particular methods in Oman, with a view to bolster the accounting requirements and boost their methods once and for all Corporate Governance. The info for study are obtained through the annual reports (published during 2001-’02) of ten Omani organizations various nature, selected through the top organizations regarding assets. The sample contained 6 exclusive and 4 general public organizations. The straightforward per centage strategy is employed to evaluate the information. The credibility of data is confirmed with all the viewpoints of management, who’re aware of the business affairs and Corporate Governance. The corporates’ perceptions from the relevance of accounting requirements once and for all Corporate Governance inside framework of Oman are also examined.


In every country, the understanding and competition among the corporates is strengthened if they comprehend each other and compare their particular overall performance, which is why the easy, understandable and similar disclosure is an important instrument. The key objective of disclosure is fulfilled therefore the energy of disclosure towards great Corporate Governance is improved if the disclosure is done on such basis as consistent and constant accounting requirements. Therefore, the growth therefore the practice of consistent accounting requirements has become an important ingredient of Corporate Governance therefore the different figures have now been contributing their particular knowledge to bolster the requirements to make the Corporate Governance far better inside framework of altering corporate environment. The organization management can also be now feeling the stress for reforming accounting methods and degree of transparency coming from aware loan providers, regulatory agencies, monetary analysts and most importantly, board of directors whom realize that this is the quality of information that will determine how effortlessly they will have discharged their particular duties towards great Corporate Governance.

In Oman, although monetary statements have now been prepared in accordance with International Accounting requirements given by the International Accounting Standards Committee (IASC), interpretations given by the Standing Interpretation Committee of IASC therefore the requirements of Commercial Companies Law of Sultanate of Oman therefore the disclosure requirements lay out inside principles for disclosure given by the Capital marketplace Authority of Sultanate of Oman, the disclosure is inadequate and is a poor trend to a nation which desires becoming strengthened more, given that it cannot aspire to tap the GDR market with inadequate monetary disclosures, considering that the much more transparent tasks of a business governed by the appropriate accounting requirements, the greater amount of accurately will its securities be valued(5).

The International Accounting Standards then followed in Oman industry are Presentation of Financial Statements (IAS 1); Inventories (IAS 2); cashflow Statements (IAS 7); web Profit or Loss for period (IAS 8); Fundamental mistakes & Changes in bookkeeping policies (IAS 9); Activities After the Balancesheet Date (IAS 10); building Contracts (IAS 11); taxes (IAS 12); part Reporting (IAS 14); results of Changing costs (IAS 15); residential property, Plant and Equipment (IAS 16); Leases (IAS 17); Revenue (IAS 18); work Advantages (IAS 19); Accounting for Govt. Grants & Govt. Assistance (IAS 20); results of Changes in foreign currency Rates (IAS 21); Business Combinations (IAS 22); Borrowing prices (IAS 23); relevant Party Disclosures (IAS 24); pension advantage Plans (IAS 26); Consolidated Financial Statements (IAS 27); assets in Associates (IAS 28), Hyperinflationary Economies (IAS 29); Financial institutions & comparable Financial Institutions (IAS 30); passions in Joint Ventures (IAS 31); Financial Instruments: Disclosure & Presentation (IAS 32); Earnings Per Share (IAS 33); Interim Financial Reporting (IAS 34); Discontinuing Operations (IAS 35); disability of possessions (IAS 36); arrangements, Contingent Liabilities & possessions (IAS 37); Intangible possessions (IAS 38); economic Instruments: Recognition & Measurement (IAS 39); Investment residential property (IAS 40); Agriculture (IAS 41).

Though the Oman industry has-been following all International Accounting guidelines, used, many of them are not clear of critique considering certain built-in weaknesses. The methods of these requirements inside Oman companies therefore the gaps are talked about with what uses with a view to bolster them for guaranteeing the nice Corporate Governance.


The main and secondary data collected through the choose organizations are carefully examined to get the level of compliance with all the accounting requirements and dilemmas in corporate methods. A number of the essential conclusions are the following:

i) Perceptions from the relevance of Accounting requirements for Corporate Governance: Except one sample of exclusive organizations which has perhaps not disclosed its viewpoint, others (90percent of sample) have actually expressed the accounting requirements much more relevant for Corporate Governance.

ii) methods of Accounting Policies Disclosed in Annual Reports: The majority of the sample organizations (80percent) disclosed twenty to twenty-five policies therefore the remaining is similarly distributed between lower than twenty and more than twenty-five requirements disclosed by the choose organizations. Most of the choose general public limited organizations have actually complied with twenty to twenty-five accounting requirements.

iii) methods of stock Valuation: The sample organizations have actually used either the lower of expense or net realisable value or going typical methods for the inventory valuation.

iv) methods of planning of cashflow Statement: most of the choose organizations have actually presented cash flow and alterations in equity statements.

v) Corporate methods of Depreciation: the research disclosed that the majority of the sample organizations (90percent) have actually used straight-line way of the computation of decline therefore the remaining used diminishing value strategy. Further examination disclosed that most sample public organizations then followed the straight-line way of decline.

vi) methods of Construction Contracts: The sample contains one building business, which has used percent of completion strategy.

vii) methods of analysis & Development: nothing of choose organizations features disclosed the spending on analysis and development.

viii) methods of various other requirements: the research disclosed that the accounting methods pertaining to fundamental errors and modifications, effects of altering costs, business combinations, hyperinflationary economies, monetary statements of financial institutions and comparable finance institutions and farming were not disclosed by the choose organizations as the organizations are not worried about such tasks.

Through the analyses of methods and general discussions, a number of prime dilemmas of accounting requirements inside framework of Oman are identified and presented right here under in brief.


i) Disclosure of Accounting Policies is followed closely by all the sample organizations, as it is required. The items stated under accounting policies or notes are far more or less exact same in every the problems selected for study, however the treatment of some things were not much like the various other problems.

The necessity of disclosure standard is to reveal the materials facts, what’s the material or immaterial it will be determined by the organization, where the influence of individual judgement is expected inside absence of tangible directions. Consequently, the presence of the conventional is doubtful.

ii) In few accounting requirements, particularly, valuation of stocks and depreciation accounting, the choice accounting treatment solutions are allowed. This kind of versatility produces problems in judging the high quality and reliability of monetary statements of an enterprise therefore the different ways are used for different organizations and for different durations, the possibility of inter-unit, intra-industry or inter-period contrast is impaired. Having less comparability makes the monetary information less of use and produces confusion inside minds of spending public.

iii) in the event of building agreements, the conventional offers up use of either finished contract strategy or portion of completion way of recognition of profit on finished contract, which appeals to the same limitation of comparability.

iv) The crossbreed way of accounting in other words. accounting for earnings on money basis and spending on accrual (mercantile basis), followed closely by corporates, easily allows them to manipulate their particular reports.

v) The requirements setting process is shut and slim therefore the execution is unsound , that causes various methods and imperfect disclosure, which defeats the prime objective of accounting requirements in achieving the great Corporate Governance.

vi) The use of IAS in toto without looking at their particular relevance inside framework of Oman manufacturing environment, lacks the main focus from the domestic problems and indigenisation.

The next advice are available on such basis as discussions with all the corporates to resolve the above mentioned dilemmas also to improve energy of accounting requirements for guaranteeing great Corporate Governance.


i) the most crucial advice for strengthening the accounting requirements to improve the high quality reporting therefore Corporate Governance values, is emphasizing your local circumstances, enhancing the relevance in other words. indigenisation of accounting requirements to make the requirements more suitable or appropriate into the current manufacturing trend in Oman.

ii) the administrative centre marketplace Authority in Oman in consultation with other specialists and regulatory figures should evolve some mechanism to reduce scope of alternate methods readily available within a bookkeeping standard. Therefore,the using consistent accounting requirements would enhance the qualitative and comparability measurements of statement of finance and reporting.

iii) The institution of harmony among the appropriate regulations like Companies Act, tax Act, Banking Regulations etc., which have considerable bearing on different items of monetary statements, would give true and fair view of business.

iv) The formulation of comprehensive and indigeneous requirements, like accounting for alterations in costs, inflationary economies, part accounting, accounting for joint ventures, earning per share, investment in subsidiaries, associates etc., helpful to make accounting requirements much more user friendly and worldwide acceptable.

In conclusion, although whole manufacturing neighborhood in Oman has-been following the International Accounting Standards and following disclosure methods assuring true and fair view of economic tasks, still much more has to be done to advertise great corporate governance and a wholesome investment environment. Another center east nations, which adopt the insurance policy of liberalization and intend to increase in worldwide money market tasks considering globalization should discover that reducing the selection of methods inside each accounting requirements, formulating the comprehensive and indigeneous requirements and making all accounting requirements as required have to be offered main concern for attaining the needed targets, otherwise it should be extremely hard for Oman people to trust the organization Governance.

* the content is presented in Accounting, Commerce & Finance: The Islamic attitude International Conference V, held in Brisbane, Australian Continent during 15-17, June 2004.


1. Tiwary, Ojha, Arun Kumar, “Corporate Governance in Asia: What it Means and What it needs?”, The Indian Journal of Commerce, Brand New Delhi, Oct-Dec,1998, p.154.

2. Chandratre, KR, “Role of Board of administrators in growing proportions of Corporate Governance and Impending Changes in Company Law, The Chartered Secretary, The Institute of Chartered Secretary of Asia, brand new Delhi, May 97, p. 505.

3. R.I.Ticker, “Corporate duty, Institutional Governance therefore the Roles of Accounting Standards” in Michael Bromwich and Anthony G. Hopwood (Eds.), Accounting guidelines Setting, a worldwide attitude, Pitman Books Ltd., London, 1883, p.27., Cited in Lele RK, Jawahar Lal, “Accounting Theory”, Himalaya Publishing home, brand new Delhi, 96,p.56.

4. Sir Adrian Cadbury, “advancements in Corporate Governance”, the organization Secretary, The Institute of Chartered Secretary of Asia, brand new Delhi, May 97, p. 497.

5. The Report of Cadbury Committee on “Financial facets of Corporate Governance”, the organization Secretary, The Institute of Chartered Secretary of Asia, brand new Delhi, May 97, p. 573.

6. Verma, Garg, Singh, “Disclosure of Accounting guidelines Vis-à-vis Company Characteristics: research of Indian Corporate Sector”, The Indian Journal of Commerce, brand new Delhi, Oct-Dec,1998, p.131.