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01 Oct 2016

Business Governance and Accounting Standards in Oman: An Empirical Study on Practices



Lately, the Oman economy has encountered several reforms, resulting in an even more market-oriented economy. Specifically, the monetary impetus extended because of the Sultanate of Oman had signaled the beginning of a confident trend. How big is Oman business has become a lot larger while the objectives of varied concerned parties may increasing, which may be pleased just by good Corporate Governance.

The necessity of good Corporate Governance has additionally been progressively acquiesced by the for enhancing the organizations’ competition, better business overall performance and better relationship with stakeholders(1). In oman additionally the companies have obliged to reform their particular concepts of Governance, which is why, Oman businesses will today be required to make increasingly more fancy disclosures than being making hitherto. This necessiates to stick to the consistent and proper bookkeeping standards, due to the fact standards lower discretion, discrepancy and enhances not just the degree of transparency in revealing of information utilizing the parties concerned but also reinforces the broader role the directors have to play for achieving Corporate objectives in the middle of challenges and adversities.

Here, the organization Governance is a voluntary, moral code of company focused on the morals, ethics, values, parameters, conduct and behavior associated with organization as well as its management. The business responsibility begins with the directors who are the mind and heart of a strong.

The Board is anticipated to do something as conscience-keeper associated with business eyesight and mission, and develop the right variety of methods for business effectiveness and pleasure of stakeholders. Hence, the organization Governance is something of accountability mainly directed towards the shareholders along with maximizing the shareholders’ welfare(2), where in actuality the debate on disclosure/ transparency issues of Corporate Governance fundamentally centres across the proper bookkeeping standards and their particular techniques and issues, due to the fact application of bookkeeping standards give countless self-confidence to the business management and work out the disclosure far better and ensure the good Corporate Governance to advertise an excellent financial investment weather.

Hence, the analysis of techniques of bookkeeping standards is a vital and appropriate dilemma of good Corporate Governance in the present environment, due to the fact standards tend to be regarded as a technical reaction to call for better monetary bookkeeping and reporting; or as a reflection of a community’s switching objectives of business behavior and a vehicle in social and political tracking and control over the enterprise(3).


The old methods of selective and conventional reporting is yielding place to even more clear and voluntary disclosures, in tune utilizing the switching times. There isn’t any replacement for adopting because of the business organizations of brand new standards of accountability, where in actuality the accountability is essentially a matter-of disclosure, of transparency, of explaining an organization’s activities to those to whom the company has responsibilities(4) i.e. the disclosure in easy, understandable and similar kind, kinds demonstrably the basis for accountability, which may be offered as long as businesses follow consistent bookkeeping guidelines and reveal adequate information on the bookkeeping standards observed. Hence, accounting standards make sure the extensive disclosure associated with business’s accountability, which may be thought to be a prime problem and a pre requisite once and for all Corporate Governance.

a study of techniques of bookkeeping standards, and their particular issues in Oman business may help to understand the present techniques of bookkeeping standards, which often assist in designing the efficient standard techniques so as to ensure good Corporate Governance resulting in an excellent financial investment environment.

Within framework, an effort is manufactured right here to look at the bookkeeping standards and their particular techniques in Oman, with a view to strengthen the bookkeeping standards and enhance their techniques once and for all Corporate Governance. The info the research tend to be gotten from yearly reports (posted during 2001-’02) of ten Omani businesses various nature, chosen from top businesses when it comes to assets. The test contained 6 exclusive and 4 public businesses. The simple per centage technique can be used to investigate the info. The authenticity associated with data is confirmed utilizing the opinions of management, who are alert to the company matters and Corporate Governance. The corporates’ perceptions regarding the relevance of bookkeeping standards once and for all Corporate Governance when you look at the framework of Oman may analyzed.


In virtually any nation, the understanding and competition among the corporates will be strengthened once they comprehend each other and compare their particular overall performance, which is why the simple, understandable and similar disclosure is a vital tool. The key goal of disclosure will be satisfied while the energy associated with disclosure towards good Corporate Governance will be enhanced as soon as the disclosure is performed on such basis as consistent and consistent bookkeeping standards. Hence, the growth while the rehearse of consistent bookkeeping standards is becoming an important ingredient of Corporate Governance while the numerous figures being contributing their particular wisdom to strengthen the standards to really make the Corporate Governance far better when you look at the framework associated with switching business environment. The corporate management can also be today feeling the stress for reforming bookkeeping techniques and degree of transparency emanating from aware lenders, regulatory companies, monetary experts and especially, board of directors which realize it is the quality of information that may determine how efficiently they’ve released their particular obligations towards the good Corporate Governance.

In Oman, although monetary statements being prepared relative to Overseas Accounting standards issued because of the Overseas Accounting Standards Committee (IASC), interpretations issued because of the Standing Interpretation Committee associated with IASC while the requirements associated with Commercial organizations legislation associated with Sultanate of Oman while the disclosure requirements put down when you look at the guidelines for disclosure issued because of the Capital marketplace Authority associated with Sultanate of Oman, the disclosure is inadequate and it is a poor occurrence to a country which desires to be strengthened more, since it cannot desire to tap the GDR marketplace with inadequate monetary disclosures, considering that the more clear activities of an organization governed because of the proper bookkeeping standards, the greater amount of precisely will its securities be valued(5).

The Overseas Accounting Standards observed in Oman business tend to be Presentation of Financial Statements (IAS 1); stocks (IAS 2); Cash Flow Statements (IAS 7); web Profit or Loss the duration (IAS 8); Fundamental mistakes & alterations in Accounting guidelines (IAS 9); Events following the Balancesheet Date (IAS 10); building Contracts (IAS 11); taxes (IAS 12); part Reporting (IAS 14); Effects of altering rates (IAS 15); Property, Plant and gear (IAS 16); Leases (IAS 17); Revenue (IAS 18); work Benefits (IAS 19); Accounting for Govt. Grants & Govt. Assistance (IAS 20); Effects of alterations in currency exchange prices (IAS 21); company Combinations (IAS 22); Borrowing prices (IAS 23); associated celebration Disclosures (IAS 24); Retirement advantage Plans (IAS 26); Consolidated Financial Statements (IAS 27); opportunities in Associates (IAS 28), Hyperinflationary Economies (IAS 29); Banks & 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); disability of Assets (IAS 36); conditions, Contingent Liabilities & Assets (IAS 37); Intangible Assets (IAS 38); economic Instruments: Recognition & Measurement (IAS 39); financial investment Property (IAS 40); Agriculture (IAS 41).

Though the Oman business was after most of the Overseas Accounting Standards, in practice, a lot of them aren’t without criticism because particular built-in weaknesses. The techniques of the standards when you look at the Oman companies while the gaps tend to be discussed in what employs with a view to strengthen all of them for ensuring the good Corporate Governance.


The principal and secondary data gathered from choose businesses tend to be very carefully analyzed to obtain the extent of conformity utilizing the bookkeeping standards and issues in business techniques. A number of the important findings tend to be the following:

i) Perceptions regarding the relevance of Accounting criteria for Corporate Governance: Except one test of exclusive businesses with not revealed its viewpoint, all others (90per cent associated with test) have expressed the bookkeeping standards much more appropriate for Corporate Governance.

ii) Practices of Accounting Policies Disclosed in Annual Reports: The majority of the test businesses (80per cent) revealed twenty to twenty-five guidelines while the continuing to be is similarly distributed between not as much as twenty plus than twenty-five standards revealed because of the choose businesses. All of the choose public minimal businesses have complied with twenty to twenty-five bookkeeping standards.

iii) Practices of Inventory Valuation: The test businesses have adopted either the low of expense or net realisable worth or moving average methods for the inventory valuation.

iv) Practices of prep of Cash Flow Statement: All the choose businesses have presented cashflow and alterations in equity statements.

v) Corporate Practices of Depreciation: the analysis revealed that almost all the test businesses (90per cent) have used straight line way for the computation of depreciation while the continuing to be used diminishing worth technique. Additional assessment revealed that all test general public businesses observed the straight line approach to depreciation.

vi) Practices of Construction Contracts: The test is made of one building organization, with used per cent of conclusion technique.

vii) Practices of Research & developing: None associated with choose businesses has revealed the expenditure on analysis and development.

viii) Practices of various other criteria: the analysis revealed that the bookkeeping techniques about fundamental mistakes and modifications, effects of switching rates, company combinations, hyperinflationary economies, monetary statements of banking institutions and comparable banking institutions and farming are not revealed by some of the choose businesses due to the fact businesses aren’t focused on these types of activities.

Through the analyses of techniques and general conversations, several of prime issues of bookkeeping standards when you look at the framework of Oman tend to be identified and presented right here under in quick.


i) Disclosure of Accounting Policies is followed by a lot of the test businesses, since it is required. The things claimed under bookkeeping guidelines or notes are more or less same in most the concerns chosen the research, but the treatment of some products are not much like the various other concerns.

The requirement associated with disclosure standard is only to disclose the material facts, what is the material or immaterial it could be determined because of the company, where in actuality the influence of personal judgement is anticipated when you look at the absence of tangible guidelines. Consequently, the existence of the conventional is skeptical.

ii) In few bookkeeping standards, such as for instance, valuation of stocks and depreciation bookkeeping, the alternative bookkeeping treatment is allowed. This sort of flexibility creates dilemmas in judging the standard and reliability of monetary statements of an enterprise while the different methods tend to be used for different businesses or even for different times, the alternative of inter-unit, intra-industry or inter-period comparison is impaired. The possible lack of comparability makes the monetary information less of use and creates confusion when you look at the thoughts associated with trading general public.

iii) In case of building agreements, the conventional offers adoption of either finished agreement technique or portion of conclusion way for recognition of revenue on finished agreement, which lures similar restriction of comparability.

iv) The hybrid approach to accounting i.e. bookkeeping for earnings on cash basis and expenditure on accrual (mercantile basis), followed by corporates, easily permits all of them to control their particular reports.

v) The standards establishing process is shut and thin while the execution is unsound , which causes the different techniques and imperfect disclosure, which beats the prime goal of bookkeeping standards in attaining the good Corporate Governance.

vi) The adoption of IAS in toto without considering their particular relevance when you look at the framework of Oman professional environment, does not have the main focus regarding the domestic dilemmas and indigenisation.

The following advice manufactured on such basis as conversations utilizing the corporates to resolve the above issues and to enhance the energy of bookkeeping standards for ensuring good Corporate Governance.


i) the most crucial advice for strengthening the accounting standards to enhance the standard reporting hence Corporate Governance values, is emphasizing the neighborhood circumstances, enhancing the relevance i.e. indigenisation of bookkeeping standards to really make the standards more desirable or appropriate to the current professional occurrence in Oman.

ii) The Capital marketplace Authority in Oman in assessment along with other professionals and regulatory figures should evolve some procedure to reduce scope of alternative techniques offered within a bookkeeping standard. Hence,the usage of consistent bookkeeping standards would boost the qualitative and comparability measurements of financial statement and reporting.

iii) The establishment of harmony among the appropriate laws and regulations like organizations Act, tax Act, Banking Regulations etc., that have significant bearing on different components of monetary statements, would give real and reasonable view of company.

iv) The formulation of extensive and indigeneous standards, like accounting for alterations in rates, inflationary economies, part bookkeeping, accounting for joint ventures, earning per share, financial investment in subsidiaries, colleagues etc., helpful to make bookkeeping standards more intuitive and worldwide appropriate.

To sum up, although entire professional neighborhood in Oman was after the Overseas Accounting Standards and adopting disclosure techniques to make sure real and reasonable view associated with financial activities, still a lot more should be done to advertise good business governance and an excellent financial investment weather. One other center east countries, which follow the policy of liberalization and want to rise in worldwide money marketplace activities because globalisation should learn that decreasing the variety of methods when you look at the each bookkeeping standards, formulating the extensive and indigeneous standards and making all bookkeeping standards as required have to be offered priority for reaching the required objectives, otherwise it’ll be extremely hard for Oman people to trust the organization Governance.

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


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

2. Chandratre, KR, “Role of Board of administrators in promising Dimensions of Corporate Governance and Impending alterations in business Law, The Chartered Secretary, The Institute of Chartered Secretary of Asia, New Delhi, May 97, p. 505.

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

4. Sir Adrian Cadbury, “Developments in Corporate Governance”, The Company Secretary, The Institute of Chartered Secretary of Asia, New Delhi, May 97, p. 497.

5. The Report associated with Cadbury Committee on “Financial areas of Corporate Governance”, The Company Secretary, The Institute of Chartered Secretary of Asia, New Delhi, May 97, p. 573.

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