• Personal
  • Corporate


Money Reviews
02 Oct 2016

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



Recently, the Oman economic climate has undergone numerous reforms, resulting in a far more market-oriented economic climate. Particularly, the monetary impetus extended because of the Sultanate of Oman had signaled the beginning of a confident trend. The size of Oman business is starting to become much larger as well as the expectations of numerous worried parties may also be increasing, which is often pleased just by good business Governance.

The significance of good business Governance has also been increasingly recognized by the industry for improving the organizations’ competitiveness, much better business overall performance and much better relationship with all stakeholders(1). In oman additionally the industries have obliged to reform their particular concepts of Governance, that, Oman companies will now have to make progressively sophisticated disclosures than were making hitherto. This necessiates to adhere to the consistent and proper bookkeeping criteria, since the criteria lower discernment, discrepancy and enhances not just the degree of transparency in sharing of information utilizing the parties worried but also reinforces the broader role the directors should play for attaining business targets in the midst of difficulties and adversities.

Right here, the organization Governance is a voluntary, ethical code of business focused on the morals, ethics, values, parameters, conduct and behavior regarding the business as well as its administration. The business responsibility starts with the directors that are the mind and heart of a firm.

The Board is expected to do something as conscience-keeper regarding the business eyesight and mission, and devise just the right style of methods for organizational effectiveness and pleasure of stakeholders. Therefore, the organization Governance is a method of responsibility mostly directed towards investors besides maximizing the investors’ welfare(2), where discussion on disclosure/ transparency problems of business Governance fundamentally centres all over proper bookkeeping criteria and their particular practices and problems, since the application of bookkeeping criteria give some confidence on business administration making the disclosure more effective and make certain the good business Governance to market a healthier financial investment weather.

Therefore, the study of practices of bookkeeping criteria is a vital and relevant problem of good business Governance in the present environment, since the criteria are regarded as a technical response to call for much better monetary bookkeeping and reporting; or as a reflection of a culture’s changing expectations of business behavior and a vehicle in social and political tracking and control over the enterprise(3).


The old means of discerning and conservative reporting is producing spot to even more clear and voluntary disclosures, in track utilizing the changing times. There is no substitute for following because of the business organizations of new criteria of responsibility, where responsibility is essentially a matter-of disclosure, of transparency, of outlining a company’s activities to those to who the company has responsibilities(4) i.e. the disclosure in simple, easy to understand and comparable form, kinds plainly the basis for responsibility, which is often provided as long as companies follow consistent bookkeeping policies and reveal sufficient details about the bookkeeping criteria used. Therefore, accounting criteria make sure the extensive disclosure regarding the business’s responsibility, which might be viewed as a prime concern and a pre necessity once and for all business Governance.

a study of practices of bookkeeping criteria, and their particular problems in Oman business might help to comprehend the prevailing practices of bookkeeping criteria, which help in designing the effective standard practices in order to guarantee good business Governance leading to a healthier financial investment environment.

Inside framework, an endeavor is made right here to look at the bookkeeping criteria and their particular practices in Oman, with a view to strengthen the bookkeeping criteria and boost their practices once and for all business Governance. The info the study are gotten from the yearly reports (posted during 2001-’02) of ten Omani companies of different nature, selected from the top companies regarding possessions. The sample contained 6 exclusive and 4 general public companies. The easy per centage method is employed to investigate the data. The authenticity regarding the data is confirmed utilizing the viewpoints of administration, that are aware of the company affairs and business Governance. The corporates’ perceptions regarding relevance of bookkeeping criteria once and for all business Governance when you look at the framework of Oman may also be analyzed.


In just about any country, the understanding and competitiveness among the list of corporates would-be enhanced when they understand each other and compare their particular overall performance, that the easy, easy to understand and comparable disclosure is a vital instrument. The main objective of disclosure would-be satisfied as well as the utility regarding the disclosure towards good business Governance would-be improved as soon as the disclosure is done on such basis as consistent and constant bookkeeping criteria. Thus, the development and the practice of uniform accounting standards has become an essential ingredient of Corporate Governance and the various bodies have been contributing their wisdom to strengthen the standards to make the Corporate Governance more effective in the context of the changing corporate environment. The organization administration is also now feeling pressure for reforming bookkeeping practices and standard of transparency coming from aware loan providers, regulating companies, monetary analysts and especially, board of directors just who understand that it’s the top-notch information which will figure out how effortlessly they’ve discharged their particular responsibilities towards good business Governance.

In Oman, although monetary statements were prepared relative to Overseas Accounting criteria given because of the Overseas Accounting Standards Committee (IASC), interpretations given because of the Standing Interpretation Committee regarding the IASC as well as the demands regarding the Commercial organizations Law regarding the Sultanate of Oman as well as the disclosure demands set out when you look at the guidelines for disclosure given because of the Capital marketplace Authority regarding the Sultanate of Oman, the disclosure is insufficient and it is a negative event to a country which wants become enhanced more, because it cannot hope to touch the GDR marketplace with insufficient monetary disclosures, since the more clear activities of a company governed because of the proper bookkeeping criteria, the more precisely will its securities be valued(5).

The Overseas Accounting Standards used in Oman business are Presentation of Financial Statements (IAS 1); Inventories (IAS 2); cashflow Statements (IAS 7); Net loss or profit the duration (IAS 8); Fundamental mistakes & alterations in bookkeeping policies (IAS 9); occasions After the Balancesheet Date (IAS 10); Construction Contracts (IAS 11); Income Taxes (IAS 12); part Reporting (IAS 14); Effects of Changing 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); Effects of alterations in foreign currency 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); Interests 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); conditions, Contingent Liabilities & possessions (IAS 37); Intangible possessions (IAS 38); Financial Instruments: Recognition & Measurement (IAS 39); Investment Property (IAS 40); Agriculture (IAS 41).

Although Oman business has been after all Overseas Accounting guidelines, in practice, some of them aren’t clear of critique because specific built-in weaknesses. The practices among these criteria when you look at the Oman industries as well as the gaps are talked about in what uses with a view to strengthen them for making sure the good business Governance.


The primary and additional data gathered from the select companies are carefully analyzed to find the degree of compliance utilizing the bookkeeping criteria and problems in business practices. A few of the important conclusions are as follows:

i) Perceptions regarding relevance of Accounting criteria for business Governance: Except one sample of exclusive companies that has perhaps not disclosed its viewpoint, all others (90per cent regarding the sample) have expressed the bookkeeping criteria as more relevant for business Governance.

ii) methods of Accounting guidelines Disclosed in Annual Reports: most of the sample companies (80per cent) disclosed twenty to twenty-five policies as well as the continuing to be is equally distributed between not as much as twenty plus than twenty-five criteria disclosed because of the select companies. All the select general public minimal companies have complied with twenty to twenty-five bookkeeping criteria.

iii) methods of stock Valuation: The sample companies have followed either the lower of cost or web realisable price or going normal options for the stock valuation.

iv) methods of prep of cashflow Statement: All the select companies have provided cashflow and alterations in equity statements.

v) business methods of Depreciation: the research unveiled that almost all the sample companies (90per cent) have followed straight-line way for the computation of depreciation as well as the continuing to be followed diminishing price method. Further assessment unveiled that all sample public companies used the straight-line approach to depreciation.

vi) methods of Construction Contracts: The sample is composed of one construction business, that has followed % of conclusion method.

vii) methods of Research & Development: nothing regarding the select companies has disclosed the spending on research and development.

viii) methods of other criteria: the research unveiled that bookkeeping practices linked to fundamental mistakes and changes, outcomes of changing costs, business combinations, hyperinflationary economies, monetary statements of financial institutions and similar finance institutions and farming are not disclosed by any of the select companies since the companies aren’t focused on such activities.

Through the analyses of practices and basic discussions, several of prime problems of bookkeeping criteria when you look at the framework of Oman are identified and provided right here under in quick.


i) Disclosure of Accounting Policies is followed closely by a lot of the sample companies, since it is required. Those items reported under bookkeeping policies or notes are more or less same throughout the issues selected the study, however the remedy for some products are not similar to the other issues.

The necessity regarding the disclosure standard is only to disclose the materials details, what’s the material or immaterial it would be decided because of the business, where impact of individual judgement is expected when you look at the lack of tangible directions. Therefore, the existence of the typical is doubtful.

ii) In few bookkeeping criteria, such as, valuation of inventories and depreciation bookkeeping, the choice bookkeeping treatment solutions are permitted. This type of mobility creates dilemmas in judging the high quality and reliability of monetary statements of an enterprise as well as the different methods are followed for various companies or even for various durations, the likelihood of inter-unit, intra-industry or inter-period contrast is damaged. The lack of comparability renders the monetary information less of good use and creates confusion when you look at the minds regarding the investing public.

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

iv) The crossbreed approach to accounting i.e. bookkeeping for income on cash foundation and spending on accrual (mercantile foundation), followed closely by corporates, easily permits them to govern their particular reports.

v) The criteria setting process is shut and slim as well as the execution is unsound , that triggers the different practices and imperfect disclosure, which defeats the prime objective of bookkeeping criteria in attaining the good business Governance.

vi) The adoption of IAS in toto without looking at their particular relevance when you look at the framework of Oman commercial environment, lacks the focus regarding domestic dilemmas and indigenisation.

The following suggestion are available on such basis as discussions utilizing the corporates to solve the above problems and improve the utility of bookkeeping criteria for making sure good business Governance.


i) the most crucial suggestion for strengthening the accounting criteria to boost the high quality stating therefore business Governance values, is targeting your local circumstances, improving the relevance i.e. indigenisation of bookkeeping criteria to make the criteria more desirable or appropriate on current commercial event in Oman.

ii) the main city marketplace Authority in Oman in consultation along with other specialists and regulating systems should evolve some apparatus to limit the range of alternate techniques offered within a bookkeeping standard. Therefore,the use of consistent bookkeeping criteria would boost the qualitative and comparability proportions of statement of finance and reporting.

iii) The establishment of balance among the list of appropriate laws like organizations Act, tax Act, Banking Regulations etc., that have considerable bearing on various components of monetary statements, would give true and fair view of business.

iv) The formulation of extensive and indigeneous criteria, like accounting for alterations in costs, inflationary economies, part bookkeeping, accounting for combined endeavors, earning per share, financial investment in subsidiaries, colleagues etc., beneficial to make bookkeeping criteria more user friendly and international appropriate.

To sum up, although whole commercial neighborhood in Oman has been after the Overseas Accounting Standards and following disclosure practices assuring true and fair view regarding the financial activities, however more needs to be done to market good business governance and a healthier financial investment weather. One other middle east nations, which follow the insurance policy of liberalization and intend to boost in international capital marketplace activities because globalisation should discover that decreasing the number of methods when you look at the each bookkeeping criteria, formulating the extensive and indigeneous criteria and making all bookkeeping criteria as required need to be offered priority for reaching the needed targets, usually it will be exceedingly burdensome for Oman people to trust the organization Governance.

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


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

2. Chandratre, KR, “Role of Board of administrators in appearing Dimensions of business Governance and Impending alterations in business Law, The Chartered Secretary, The Institute of Chartered Secretary of Asia, brand new Delhi, might 97, p. 505.

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

4. Sir Adrian Cadbury, “advancements in business Governance”, The Company Secretary, The Institute of Chartered Secretary of Asia, brand new Delhi, might 97, p. 497.

5. The Report regarding the Cadbury Committee on “Financial areas of business Governance”, The Company Secretary, The Institute of Chartered Secretary of Asia, brand new Delhi, might 97, p. 573.

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