01 Oct 2016

Corporate Governance and Accounting Standards in Oman: An Empirical research on Practices



Recently, the Oman economic climate has withstood several reforms, causing a more market-oriented economic climate. Specifically, the financial impetus extended because of the Sultanate of Oman had signaled the beginning of a positive trend. The size of Oman industry is now a lot larger together with objectives of numerous worried events may increasing, which is often satisfied just by great Corporate Governance.

The importance of great Corporate Governance has additionally been more and more identified by the industry for improving the businesses’ competitiveness, better business performance and better commitment with stakeholders(1). In oman in addition the companies have obliged to reform their particular maxims of Governance, that, Oman companies will now be required to make more and more sophisticated disclosures than have already been making hitherto. This necessiates to stick to the uniform and proper bookkeeping requirements, once the requirements decrease discretion, discrepancy and enhances not merely the amount of transparency in revealing of data because of the events worried and reinforces the wider role the directors need certainly to play for attaining Corporate goals amid difficulties and adversities.

Right here, the organization Governance is a voluntary, honest rule of company worried about the morals, ethics, values, parameters, conduct and behavior for the business and its own administration. The business responsibility starts with the directors who will be your head and heart of a company.

The Board is anticipated to act as conscience-keeper for the business vision and goal, and develop suitable variety of methods for organizational effectiveness and satisfaction of stakeholders. Therefore, the organization Governance is a method of accountability mostly directed to the investors in addition to making the most of the investors’ welfare(2), where in fact the discussion on disclosure/ transparency dilemmas of Corporate Governance fundamentally centres all over proper bookkeeping requirements and their particular practices and dilemmas, once the application of bookkeeping requirements give plenty of confidence into business administration and make the disclosure more beneficial and make certain the nice Corporate Governance to market a healthy investment climate.

Therefore, the research of practices of bookkeeping requirements is a vital and relevant issue of great Corporate Governance in our environment, once the requirements are considered a technical reaction to necessitate better financial bookkeeping and reporting; or as a reflection of a society’s switching objectives of business behavior and an automobile in social and governmental tracking and control of the enterprise(3).


The old means of selective and traditional reporting is producing spot to more transparent and voluntary disclosures, in track because of the switching times. There is no substitute for adopting because of the business organizations of the latest requirements of accountability, where in fact the accountability is largely a matter of disclosure, of transparency, of describing a company’s tasks to those to whom the organization has responsibilities(4) in other words. the disclosure in easy, clear and similar form, forms clearly the foundation for accountability, which is often supplied only when companies adopt uniform bookkeeping policies and disclose sufficient information on the bookkeeping requirements accompanied. Therefore, accounting requirements make sure the comprehensive disclosure for the business’s accountability, which may be thought to be a prime concern and a pre necessity for good Corporate Governance.

a study of practices of bookkeeping requirements, and their particular dilemmas in Oman industry may help to understand the existing practices of bookkeeping requirements, which in turn assist in designing the efficient standard practices in order to ensure great Corporate Governance causing a healthy investment environment.

Within framework, an effort is made here to look at the bookkeeping requirements and their particular practices in Oman, with a view to bolster the bookkeeping requirements and improve their practices for good Corporate Governance. The data when it comes to research are obtained through the yearly reports (published during 2001-’02) of ten Omani companies of different nature, selected through the top companies in terms of possessions. The test contained 6 personal and 4 general public companies. The easy per centage technique is used to evaluate the information. The credibility for the information is confirmed because of the opinions of administration, who will be aware of the organization matters and Corporate Governance. The corporates’ perceptions regarding the relevance of bookkeeping requirements for good Corporate Governance within the framework of Oman may analyzed.


In any nation, the awareness and competitiveness among the corporates could be strengthened if they understand each other and compare their particular performance, that the straightforward, clear and similar disclosure is a vital tool. The main objective of disclosure could be satisfied together with energy for the disclosure towards great Corporate Governance could be enhanced as soon as the disclosure is completed on such basis as uniform and consistent bookkeeping requirements. Therefore, the growth together with training of uniform bookkeeping requirements has become an essential ingredient of Corporate Governance together with different systems have already been contributing their particular wisdom to bolster the requirements to really make the Corporate Governance more beneficial within the framework for the switching business environment. The organization administration can be now experiencing the pressure for reforming bookkeeping practices and standard of transparency coming from alert lenders, regulating companies, financial experts and most importantly, board of directors which realize that it will be the top-notch information that may figure out how efficiently they have released their particular duties to the great Corporate Governance.

In Oman, although the financial statements have already been prepared prior to Overseas Accounting requirements released because of the Overseas Accounting Standards Committee (IASC), interpretations released because of the Standing Interpretation Committee for the IASC together with demands for the Commercial Companies legislation for the Sultanate of Oman together with disclosure demands put down within the principles for disclosure released because of the Capital Market Authority for the Sultanate of Oman, the disclosure is inadequate and is a poor trend to a nation which desires is strengthened more, because it cannot aspire to tap the GDR market with inadequate financial disclosures, since the more transparent tasks of a company governed because of the proper bookkeeping requirements, the more precisely will its securities be valued(5).

The Overseas Accounting Standards accompanied in Oman industry are Presentation of Financial Statements (IAS 1); stocks (IAS 2); income Statements (IAS 7); Net loss or profit when it comes to duration (IAS 8); Fundamental Errors & Changes in bookkeeping policies (IAS 9); Activities After the Balancesheet Date (IAS 10); building Contracts (IAS 11); Income Taxes (IAS 12); portion Reporting (IAS 14); ramifications of Switching rates (IAS 15); Property, Plant and gear (IAS 16); Leases (IAS 17); income (IAS 18); Employment Advantages (IAS 19); Accounting for Govt. Grants & Govt. Help (IAS 20); ramifications of Changes in currency exchange Rates (IAS 21); company Combinations (IAS 22); Borrowing prices (IAS 23); associated Party Disclosures (IAS 24); pension Benefit Plans (IAS 26); Consolidated Financial Statements (IAS 27); opportunities in Associates (IAS 28), Hyperinflationary Economies (IAS 29); Financial institutions & comparable banking 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); Impairment of possessions (IAS 36); Provisions, Contingent Liabilities & possessions (IAS 37); Intangible possessions (IAS 38); monetary Instruments: Recognition & Measurement (IAS 39); Investment Property (IAS 40); Agriculture (IAS 41).

Although Oman industry has been after all Overseas Accounting Standards, in practice, many of them are not without criticism due to certain inherent weaknesses. The practices of the requirements within the Oman companies together with gaps are talked about in what uses with a view to bolster all of them for making sure the nice Corporate Governance.


The principal and additional information collected through the choose companies are very carefully analyzed to find the extent of conformity because of the bookkeeping requirements and dilemmas in business practices. A few of the important conclusions are as follows:

i) Perceptions regarding the relevance of Accounting Standards for Corporate Governance: Except one test of personal companies which includes perhaps not disclosed its viewpoint, others (90percent for the test) have expressed the bookkeeping requirements much more relevant for Corporate Governance.

ii) Practices of Accounting Policies Disclosed in Annual Reports: The majority of the test companies (80percent) disclosed twenty to 25 policies together with continuing to be is equally distributed between under twenty and much more than 25 requirements disclosed because of the choose companies. All the choose general public minimal companies have complied with twenty to 25 bookkeeping requirements.

iii) Practices of Inventory Valuation: The test companies have used either the lower of cost or web realisable price or moving typical means of the stock valuation.

iv) Practices of Preparation of income declaration: all of the choose companies have presented income and alterations in equity statements.

v) Corporate Practices of Depreciation: the research unveiled that most the test companies (90percent) have followed straight line way for the calculation of decline together with continuing to be followed decreasing price technique. Additional examination unveiled that test general public companies accompanied the straight line approach to decline.

vi) Practices of Construction Contracts: The test includes one construction business, which includes followed percent of conclusion technique.

vii) Practices of analysis & Development: nothing for the choose companies has disclosed the spending on study and development.

viii) Practices of various other Standards: the research unveiled that the bookkeeping practices about fundamental mistakes and modifications, ramifications of switching prices, company combinations, hyperinflationary economies, financial statements of banking institutions and similar finance institutions and farming were not disclosed by any of the choose companies once the companies are not worried about such tasks.

From analyses of practices and general discussions, several of prime dilemmas of bookkeeping requirements within the framework of Oman are identified and presented here under in quick.


i) Disclosure of Accounting Policies is followed closely by most of the test companies, since it is required. The items stated under bookkeeping policies or records tend to be more or less same in all the concerns selected when it comes to research, although treatment of some products were not like the various other concerns.

The requirement for the disclosure standard is just to reveal the material facts, what’s the material or immaterial it will be decided because of the business, where in fact the impact of private judgement is anticipated within the lack of tangible instructions. Consequently, the existence of the typical is skeptical.

ii) In few bookkeeping requirements, including, valuation of stocks and depreciation bookkeeping, the alternative bookkeeping treatment solutions are allowed. This kind of flexibility produces dilemmas in judging the product quality and reliability of financial statements of an enterprise together with different methods are followed for different companies or for different durations, the likelihood of inter-unit, intra-industry or inter-period comparison is weakened. The lack of comparability renders the financial information less of good use and produces confusion within the thoughts for the investing general public.

iii) in case there is construction agreements, the typical offers use of either completed agreement technique or portion of conclusion way for recognition of profit on completed agreement, which appeals to the same restriction of comparability.

iv) The crossbreed approach to accounting in other words. bookkeeping for earnings on money foundation and spending on accrual (mercantile foundation), followed closely by corporates, conveniently enables all of them to govern their particular reports.

v) The requirements establishing procedure is closed and narrow together with execution is unsound , that causes the many practices and imperfect disclosure, which defeats the prime objective of bookkeeping requirements in achieving the great Corporate Governance.

vi) The use of IAS in toto without considering their particular relevance within the framework of Oman industrial environment, does not have the focus regarding the domestic dilemmas and indigenisation.

The next suggestion are manufactured on such basis as discussions because of the corporates to fix the aforementioned dilemmas and to enhance the energy of bookkeeping requirements for making sure great Corporate Governance.


i) the main suggestion for strengthening the accounting requirements to boost the product quality reporting thus Corporate Governance values, is targeting your local problems, improving the relevance in other words. indigenisation of bookkeeping requirements to really make the requirements more suitable or appropriate into existing industrial trend in Oman.

ii) the administrative centre Market Authority in Oman in assessment with other specialists and regulating systems should evolve some method to limit the scope of alternate techniques available within a bookkeeping standard. Therefore,the use of uniform bookkeeping requirements would enhance the qualitative and comparability dimensions of financial statement and reporting.

iii) The organization of harmony among the applicable legislation like Companies Act, tax Act, Banking Regulations etc., which may have considerable bearing on different components of financial statements, would give real and fair view of company.

iv) The formula of comprehensive and indigeneous requirements, like accounting for alterations in prices, inflationary economies, part bookkeeping, accounting for shared endeavors, making per share, investment in subsidiaries, associates etc., helpful to make bookkeeping requirements more easy to use and intercontinental appropriate.

In conclusion, although the entire industrial community in Oman has been after the Overseas Accounting Standards and adopting disclosure practices to make sure real and fair view for the financial tasks, however a lot more has to be done to market great business governance and a healthy investment climate. Others center eastern nations, which adopt the policy of liberalization and intend to increase in intercontinental money market tasks due to globalisation should discover that decreasing the variety of approaches within the each bookkeeping requirements, formulating the comprehensive and indigeneous requirements and making all bookkeeping requirements as required have to be provided priority for achieving the needed goals, otherwise it will likely be exceedingly difficult for Oman people to trust the organization Governance.

* The article is presented in Accounting, Commerce & Finance: The Islamic Perspective Overseas Conference V, held in Brisbane, Australian Continent during 15-17, June 2004.


1. Tiwary, Ojha, Arun Kumar, “Corporate Governance in Asia: just what it indicates and just what it requires?”, The Indian Journal of Commerce, New Delhi, Oct-Dec,1998, p.154.

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

3. R.I.Ticker, “Corporate obligation, Institutional Governance together with Roles of Accounting Standards” in Michael Bromwich and Anthony G. Hopwood (Eds.), Accounting Standards Setting, a worldwide Perspective, 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, might 97, p. 497.

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

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



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