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03 Oct 2016

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



In recent years, the Oman economy features undergone a number of reforms, leading to a far more market-oriented economy. Specifically, the economic impetus extended because of the Sultanate of Oman had signaled the start of a positive trend. How big is Oman industry is becoming a lot larger together with objectives of varied worried events are increasing, which are often happy only by great business Governance.

The importance of great business Governance has also been progressively acquiesced by the for improving the firms’ competitiveness, better business performance and better commitment with all stakeholders(1). In oman in addition the industries have actually obliged to reform their particular principles of Governance, that, Oman businesses will today be required to make increasingly more sophisticated disclosures than have been making hitherto. This necessiates to stick to the uniform and correct bookkeeping standards, because the standards lower discernment, discrepancy and improves not only the degree of transparency in sharing of information using events worried and reinforces the wider role the administrators have to play for attaining business targets in the midst of challenges and adversities.

Right here, the organization Governance is a voluntary, honest rule of business focused on the morals, ethics, values, parameters, conduct and behavior regarding the company as well as its management. The business duty starts with the administrators who’re the mind and soul of a firm.

The Board is anticipated to behave as conscience-keeper regarding the business eyesight and objective, and devise the best particular systems for business effectiveness and satisfaction of stakeholders. Hence, the organization Governance is something of responsibility mainly directed to the shareholders and maximizing the shareholders’ welfare(2), where in actuality the debate on disclosure/ transparency issues of business Governance sooner or later centres all over correct bookkeeping standards and their particular methods and issues, because the application of bookkeeping standards give plenty of confidence into the business management and then make the disclosure far better and ensure the good business Governance to market a wholesome financial investment climate.

Hence, the research of methods of bookkeeping standards is an important and relevant problem of great business Governance in today’s environment, because the standards tend to be regarded as a technical reaction to call for better economic bookkeeping and reporting; or as a representation of a culture’s switching objectives of business behavior and a car in personal and political monitoring and control over the enterprise(3).


The old means of selective and conservative reporting is producing place to even more transparent and voluntary disclosures, in track using switching times. There is absolutely no alternative to following because of the business entities of brand new standards of responsibility, where in actuality the responsibility is largely a matter-of disclosure, of transparency, of explaining an organization’s tasks to those to whom the company features responsibilities(4) i.e. the disclosure in easy, easy to understand and similar type, types plainly the foundation for responsibility, which are often offered as long as businesses adopt uniform bookkeeping policies and reveal sufficient information regarding the bookkeeping standards accompanied. Hence, accounting standards ensure the extensive disclosure regarding the business’s responsibility, which may be considered a prime issue and a pre requisite once and for all business Governance.

a study of methods of bookkeeping standards, and their particular issues in Oman industry might help to know the existing methods of bookkeeping standards, which often aid in creating the efficient standard methods in order to ensure great business Governance resulting in a wholesome financial investment environment.

Inside framework, an attempt is manufactured right here to examine the bookkeeping standards and their particular methods in Oman, with a view to strengthen the bookkeeping standards and enhance their methods once and for all business Governance. The info for the research tend to be acquired from the annual reports (published during 2001-’02) of ten Omani businesses various nature, chosen from the top businesses when it comes to possessions. The test contains 6 personal and 4 public businesses. The simple per centage method is used to investigate the data. The authenticity regarding the information is validated using views of management, who’re aware of the company affairs and business Governance. The corporates’ perceptions on relevance of bookkeeping standards once and for all business Governance in framework of Oman are examined.


In any nation, the awareness and competitiveness among the list of corporates will be enhanced when they comprehend each other and compare their particular performance, that the straightforward, easy to understand and similar disclosure is an important instrument. The primary objective of disclosure will be fulfilled together with utility regarding the disclosure towards great business Governance will be enhanced once the disclosure is performed on the basis of uniform and constant bookkeeping standards. Hence, the growth together with training of uniform bookkeeping standards happens to be an important ingredient of business Governance together with various figures have been contributing their particular knowledge to strengthen the standards to really make the business Governance far better in framework regarding the switching business environment. The organization management can also be today experiencing the pressure for reforming bookkeeping methods and level of transparency emanating from aware loan providers, regulating agencies, economic analysts and first and foremost, board of administrators whom understand that this is the quality of information which will regulate how effortlessly they will have discharged their particular obligations to the great business Governance.

In Oman, although economic statements have been ready in accordance with International Accounting standards issued because of the International Accounting Standards Committee (IASC), interpretations issued because of the Standing Interpretation Committee regarding the IASC together with requirements regarding the Commercial Companies legislation regarding the Sultanate of Oman together with disclosure requirements put down in principles for disclosure issued because of the Capital Market Authority regarding the Sultanate of Oman, the disclosure is inadequate and it is an adverse phenomenon to a country which desires to be enhanced more, since it cannot hope to touch the GDR market with inadequate economic disclosures, since the much more transparent tasks of an organization governed because of the correct bookkeeping standards, the more accurately will its securities be valued(5).

The International Accounting Standards accompanied in Oman industry tend to be Presentation of Financial Statements (IAS 1); Inventories (IAS 2); Cash Flow Statements (IAS 7); Net loss or profit for the period (IAS 8); Fundamental Errors & Changes in Accounting policies (IAS 9); Events following the Balancesheet Date (IAS 10); building Contracts (IAS 11); Income Taxes (IAS 12); part Reporting (IAS 14); aftereffects of Changing costs (IAS 15); Property, Plant and Equipment (IAS 16); Leases (IAS 17); Revenue (IAS 18); work Benefits (IAS 19); Accounting for Govt. Grants & Govt. Aid (IAS 20); aftereffects of Changes in Foreign Exchange prices (IAS 21); company Combinations (IAS 22); Borrowing Costs (IAS 23); Related Party Disclosures (IAS 24); Retirement advantage Plans (IAS 26); Consolidated Financial Statements (IAS 27); opportunities in Associates (IAS 28), Hyperinflationary Economies (IAS 29); Banking institutions & Similar banking institutions (IAS 30); passions in Joint Ventures (IAS 31); Financial Instruments: Disclosure & Presentation (IAS 32); profits Per Share (IAS 33); Interim Financial Reporting (IAS 34); Discontinuing Operations (IAS 35); disability 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 industry has been following all the International Accounting Standards, in practice, some of them aren’t free from criticism as a result of particular inherent weaknesses. The methods of the standards in Oman industries together with spaces tend to be talked about in what follows with a view to strengthen them for ensuring the good business Governance.


The primary and secondary information collected from the select businesses tend to be carefully examined to get the level of compliance using bookkeeping standards and issues in business methods. Some of the essential results tend to be as follows:

i) Perceptions on relevance of Accounting Standards for business Governance: Except one test of personal businesses which includes not revealed its viewpoint, others (90% regarding the test) have actually expressed the bookkeeping standards much more relevant for business Governance.

ii) Practices of Accounting guidelines Disclosed in Annual Reports: The majority of the test businesses (80%) revealed twenty to twenty-five policies together with staying is equally distributed between significantly less than twenty and much more than twenty-five standards revealed because of the select businesses. All the select public restricted businesses have actually complied with twenty to twenty-five bookkeeping standards.

iii) Practices of Inventory Valuation: The test businesses have actually followed either the lower of price or net realisable value or going typical means of the inventory valuation.

iv) Practices of Preparation of Cash Flow declaration: all of the select businesses have actually presented cash flow and alterations in equity statements.

v) business Practices of Depreciation: The study revealed that most the test businesses (90%) have actually followed straight-line method for the calculation of depreciation together with staying followed decreasing value method. Further examination revealed that all test general public businesses accompanied the straight-line method of depreciation.

vi) Practices of Construction Contracts: The test is composed of one construction company, which includes followed per cent of conclusion method.

vii) Practices of analysis & Development: None regarding the select businesses features revealed the expenditure on research and development.

viii) Practices of other Standards: The study revealed the bookkeeping methods linked to fundamental errors and modifications, outcomes of switching prices, business combinations, hyperinflationary economies, economic statements of financial institutions and similar financial institutions and agriculture weren’t revealed by some of the select businesses because the businesses aren’t focused on such tasks.

Through the analyses of methods and basic discussions, a few of prime issues of bookkeeping standards in framework of Oman tend to be identified and presented right here under in quick.


i) Disclosure of Accounting Policies is accompanied by almost all of the test businesses, since it is required. The things claimed under bookkeeping policies or records tend to be more or less same in every the problems chosen for the research, although treatment of some things weren’t similar to the other problems.

The requirement regarding the disclosure standard is to reveal the materials facts, what is the material or immaterial it might be determined because of the business, where in actuality the influence of private judgement is anticipated in absence of concrete instructions. Therefore, the existence of the typical is doubtful.

ii) In few bookkeeping standards, such, valuation of stocks and depreciation bookkeeping, the alternative bookkeeping treatment solutions are permitted. This type of freedom produces problems in judging the quality and dependability of economic statements of an enterprise together with different ways tend to be followed for different businesses and for different durations, the possibility of inter-unit, intra-industry or inter-period comparison is damaged. The possible lack of comparability renders the economic information less helpful and produces confusion in minds regarding the investing general public.

iii) In case of construction agreements, the typical provides for use of either finished contract method or percentage of conclusion method for recognition of profit on finished contract, which lures exactly the same limitation of comparability.

iv) The crossbreed method of accounting i.e. bookkeeping for earnings on cash foundation and expenditure on accrual (mercantile foundation), accompanied by corporates, conveniently allows them to manipulate their particular reports.

v) The standards setting process is closed and slim together with execution is unsound , that triggers the different methods and imperfect disclosure, which beats the prime objective of bookkeeping standards in achieving the great business Governance.

vi) The use of IAS in toto without considering their particular relevance in framework of Oman commercial environment, does not have the main focus on domestic problems and indigenisation.

The following advice are formulated on the basis of discussions using corporates to solve the above issues and to increase the utility of bookkeeping standards for ensuring great business Governance.


i) the most crucial advice for strengthening the accounting standards to improve the quality reporting therefore business Governance values, is concentrating on the area circumstances, improving the relevance i.e. indigenisation of bookkeeping standards to really make the standards considerably better or proper into the current commercial phenomenon in Oman.

ii) the administrative centre Market Authority in Oman in consultation with other professionals and regulating figures should evolve some mechanism to reduce scope of alternative practices readily available within an accounting standard. Hence,the usage of uniform bookkeeping standards would enhance the qualitative and comparability measurements of financial statement and reporting.

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

iv) The formulation of extensive and indigeneous standards, like accounting for alterations in prices, inflationary economies, part bookkeeping, accounting for shared ventures, earning per share, financial investment in subsidiaries, colleagues etc., useful to make bookkeeping standards much more easy to use and worldwide acceptable.

In conclusion, although whole commercial neighborhood in Oman has been following International Accounting Standards and following disclosure methods to ensure true and fair view regarding the economic tasks, nonetheless much more should be done to market great business governance and a wholesome financial investment climate. Others middle east countries, which adopt the insurance policy of liberalization and intend to rise in worldwide capital market tasks as a result of globalisation should discover that reducing the selection of techniques in each bookkeeping standards, formulating the extensive and indigeneous standards and making all bookkeeping standards as required have to be given top priority for achieving the required targets, usually it will be exceedingly problematic for Oman people to trust the organization Governance.

* this article is presented in Accounting, Commerce & Finance: The Islamic attitude International meeting V, presented in Brisbane, Australia during 15-17, Summer 2004.


1. Tiwary, Ojha, Arun Kumar, “business Governance in India: just what it indicates and just 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 rising proportions of business Governance and Impending Changes in Company Law, The Chartered Secretary, The Institute of Chartered Secretary of India, New Delhi, May 97, p. 505.

3. R.I.Ticker, “business duty, Institutional Governance together with Roles of Accounting Standards” in Michael Bromwich and Anthony G. Hopwood (Eds.), Accounting Standards Setting, a global attitude, 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, “advancements in business Governance”, The Company Secretary, The Institute of Chartered Secretary of India, New Delhi, May 97, p. 497.

5. The Report regarding the Cadbury Committee on “Financial Aspects of business Governance”, The Company Secretary, The Institute of Chartered Secretary of India, New Delhi, May 97, p. 573.

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