Exploring the missing links of accounting parlance in Iraq Essay Example

Exploring the missing links of accounting parlance in Iraq Essay Example Exploring the missing links of accounting parlance in Iraq Essay Exploring the missing links of accounting parlance in Iraq Essay Iraq has the common name, the Cradle of Civilization , as it was home to the earliest known civilizationon Earth, the Sumerian civilisation, which arose in the fertileTigris-Euphrates river valleyA of southern Iraq. Notwithstanding the fact that it has a rich history roots, Iraq since the invasion in 2003 by states of United States of America and Great Britain, has been regarded as a Cradle for Oil and Anti-Terrorism wars. Because of the unsolved feuds between states, Economic and Business activities have been inert, and accounting pattern is as if has been pine awaying. Few have been written to supplement Accounting in Iraq. With this respect, this research will seek to link the losing links of accounting idiom in Iraq and turn out the dynamism of Accounting, which no affair how Iraq s environment is an unhealthy land neither for Business minutess nor for residence because of the war eruption. Still, Accounting is adoptive in nature that can run under Iraq s state of affairs. With the proposed rubric of the research ; Iraq: Brick by Brick the survey provides a wider skyline for Iraqi Accounting System and Tax Regulations. This research will supply compiled supplement stuffs of the Historical histories of the development of accounting is Iraq, Accounting modulating organic structure and their Commissariats, Accounting system of Book maintaining and revenue enhancement ordinances being Implemented. Besides, this research will supply possible solutions and subscribers in reforming accounting system in Iraq in conformity with its national Reconstruction . Irak: Brick by Brick Iraq is rich in history, civilization and people. The land that now encompasses modern Iraq is known as the Cradle of Civilization. Around 4000 BC the antediluvian Sumerian civilization flourished here, arising land cultivation, irrigation, urban society and the first written alphabet. Known in ancient times as Mesopotamia, the land of Iraq figures conspicuously in the Bible, This is where the garden of Eden is depicted, where the tower of Babel was constructed, where Abram was foremost called by God to go forth place and family, and where the Hebrews were exiled following the devastation of the temple by King Nebuchadnezzar II of Babylon. Traversed by the Tigris and Euphrates rivers, Iraq is largely desert, with mountains in the northern parts and fertile fields in the far south. It is surrounded by Kuwait and Saudi Arabia to the South, Jordan to the West, Syria and Turkey to the North and Iran to the E. A narrow strip in the far south boundary lines on the Persian Gulf. Iraq is known for its oil, holding the 2nd largest militias in the universe. Grosss from oil gross revenues in the 1970s and 1980s enabled the state to do great paces in instruction, wellness attention and basic substructure. Till 1990, Iraq was known as one of the most extremely developed states in the Middle East. Some 22 million people call Iraq place. Seventy-five per centum or more are Arabs, 15-20 per centum is Kurdish and the balance are Turkoman, Assyrian, or another cultural group. The huge bulk 97 per centum is Muslim, and the staying three per centum is Christian. Cradle for First Accounting Practice Accounting was born before composing or Numberss existed, some 10,000 old ages ago, in the country known as Mesopotamia, subsequently Persia, and today the states of Iran and Iraq. This country contains the Tigris Euphrates river vale, a big fertile country 10,000 old ages ago with a big booming population and active trading between towns and metropoliss up and down the two rivers.A Writing and Numberss would be non being invented for about another 5,000 old ages. At that clip, merchandisers faced many of the same jobs concerns face today. They had to transport their ware up and down the rivers, and that meant swearing a boater with their goods. Unfortunately, non all boaters were honest, and dissensions frequently arose about how much was shipped versus what was received at the other end.A To cover with the job, merchandisers came up with an clever program. They made little clay items, in assorted forms and with assorted markers, to bespeak different merchandises. One would intend a basket of grain ; another would intend a pot of oil, etc. They had over 200 such items to bespeak a big assortment of common goods, including nutrient, leather, vesture, utensils, tools, jewelry, etc.A Before transporting their goods, a merchandiser would take one item for each point in the cargo, and incase the items in a ball of clay, called a bollae intending ball. The ball would be dried in the Sun, given to the boater, and so broken by the purchaser on the other terminal of the dealing. The purchaser would fit the items with the points in the cargo, to verify that everything sent was accounted for.A This is the map ofA protection of assets, and is a major map of all modern accounting systems. It was of import 10,000 old ages ago and is merely as of import now. Today we see merchandisers making the same thing as their opposite numbers 10 millenary ago today they get a measure of ladling a listing of the ware entrusted to a shipper.A The system of utilizing bollae continued for about 5,000 old ages, all before the innovation of composing or Numberss. One twenty-four hours, likely by accident, a wet clay bollae was rolled over a loose item, lying on the land. The feeling of the item was left in the wet clay. Merchants began pressing the items on the exterior of the bollae, in add-on to seting the items inside the ball.A Economic System Beehner ( 2007 ) cited in his Article the Economic Status of Iraq ; Iraq s economic system is dominated by theA oilA sector, which has traditionally provided about 95 % of foreign exchange net incomes. In the 1980s fiscal jobs caused by monolithic outgos in theA eight-year warA withA IranA and harm to oil export installations by Iran led the authorities to implementA asceticism steps, borrow to a great extent, and subsequently rescheduleA foreign debtA payments. Iraq suffered economic losingss from the war of at leastA US $ 100A billion. After belligerencies ended in 1988, oil exports bit by bit increased with the building of new grapevines and Restoration of damaged installations. A combination of low oil monetary values, repayment ofA war debtsA which was estimated at aroundA US $ 3 billion a twelvemonth and the costs of Reconstruction resulted in a serious fiscal crisis which was the chief short term motive for theA invasion of Kuwait. On November 20, 2004, theA Paris ClubA of creditor states agreed to compose off ( 80 % ) $ 33 billion of Iraq s $ 42 billion debt to Club members. Iraq s entire external debt was around $ 120 billion at the clip of the 2003 invasion, and had grown by $ 5 billion by 2004. TheA debt reliefA will be implemented in three phases: two of 30 % each and one of 20 % .Bohsem, Guido A ; Somerville, Glen, 1993 ) At the terminal of 2005, and in the first half of 2006, Iraq implemented a restructuring of about $ 20 billion of commercial debt claims on footings comparable to that of its November 2004 Paris Club understanding ( i.e. with an 80 % write-down ) . Iraq offered to its larger claimants a U.S. dollar denominated bond maturing in 2028. Smaller commercial claimants received a hard currency colony of comparable value. Indeed, Iraq had a rich civilisation as it was one of the innovators in the field of Accounting and besides in the development of money. But Through the old ages Iraq experienced events that toiled their once rich civilisation Such as Saddam Hussein s dominance that brought series of wars, find of arms of mass devastation and America s declaration of war against Iraq in chase of its Anti-terrorism run. War after war Iraq was susceptible to instability and temporalties with respects to their administration and accounting pattern is no exclusion from it. Iraqi accounting Administration The Board of Supreme Audit ( BSA ) is the legislative organic structure that is responsible for the issue of accounting criterions and policies in Iraq. The function of the said organic structure is stated in Article 6 ( 1990, the Board of Supreme Audit Law ) : Board of Supreme Audit was enacted and still into force the intents of: Puting the function, responsibilities, and fortes of the Board of supreme Audit and heightening its function to take part in bettering the public presentation of the province s establishments. to enable this Board to procure the auditing demands and its demands of resources, civil equipments, and information whether to state an sentiment about the truth of the fiscal state of affairss and the activity consequences or to measure theA public presentation of executive institutionsA under its reappraisal. To happen administrative and organisational constructions that goes along with the stages of the development of national economic system and gives adequate flexibleness to the Board in be aftering and delegating responsibilities and fortes. A A To procure the needed cardinal supervising to direct commanding tasksA andA developing the bases rules, agencies and ways of execution and measure the consequences In add-on to enablingA the Board to cover all the services and establishments of the province in the governorates with auditing and supervising with the highest degree of competency and efficiency. The Audit Advisory Board ( AAB ) is chiefly responsible for forming and oversing the auditing and accounting profession within the private sector in Iraq, while the board of Supreme Audit ( BSA ) is responsible for the audit governmental entities ( Al-Salman, 2009 ) . The Chairman of Board of Supreme Audit ( BSA ) is the president of Audit Advisory Board ( AAB ) . Accounting Standards Iraqi organisations and Foreign Entities runing in Iraq must utilize the Unified Accounting System ( U.A.S ) for statutory coverage, including audited fiscal statements which needs to run into the demands of the revenue enhancement governments, The Central Bank of Iraq and The Registrar of Companies. Any organisation may utilize any accounting Standards internally or for any other coverage intents. However, describing to Iraqi regulators should follow with U.A.S requirements.BSA being the legislative organic structure responsible for issue of criterions stated in their accounting criterion no. 1 the composing of the Board of Accounting and Auditing Standards along with this are other criterions formulated by the Board: Accounting Standard no. 2 Accounting Treatment about research and Development costs ( 1992 ) Accounting Standard no. 3 Capitalizing Loans disbursal ( 1993 ) Accounting Standard no. 4 Accounting of Change, Effect in Foreign Currency Price ( 1993 ) Accounting Standard no. 5 Accounting on Inventory, Its rating and presentation in Fiscal Statements ( 1995 ) Accounting Standard no. 6 Disclosure of Information that are Related with Fiscal Statements and Accounting Policies ( 1995 ) Accounting Standard no. 7 Cash Flows ( 1996 ) Accounting Standard no. 8 Information Reflecting the effects of altering Monetary values ( 1997 ) Accounting Standard no. 9 Contingencies and Events happening after Balance Sheet day of the month ( 1997 ) Accounting Standard no. 10 Disclosures of fiscal statements in Banks and Similar Institutions ( 1998 ) Accounting Standard no. 11 Agricultural Accounting ( 1998 ) Accounting Standard no. 12 Capital Net income and Loss ( 2000 ) Accounting Standard no. 13 Accounting for revenue enhancements on Incomes ( 2001 ) Accounting Standard no. 14 Accounting for Investments ( 2001 ) Iraqi Accounting Rules Book Keeping and Ledger Maintenance Accounting Practice in Iraq may demo facets that are different from the by and large followed regulations. Disparities in the applied regulations are consequences of Culture dynamism and Behaviour of the Environment. Alnajjar ( 2004 ) laid down these differences in the regulations: Organizations operate in Iraq should maintain their histories and legers in Arabic linguistic communication and Reports issue to the Iraqi regulators has to be in Arabic. These regulations are implied because of the Arabic Dialect that is spoken all throughout Iraq. Organizations can utilize internally any currency to enter their accounting minutess but for the intent of audited fiscal Statements to be presented to the concerned governments needs to be Iraqi Dinars, since it is the official currency of the state. Accounting interventions under U.A.S may transport ambiguity for certain international accounting policies such as the intervention by caput of office bear downing a certain per centum of its operating expense to a contract being executed in Iraq, or the intervention of the Management Expenses incurred by the Head office in trust with the activities of the entity runing in Iraq. Iraqi Tax Regulations One of the major beginnings of Income in Iraq is their Tax. Harmonizing to the Ministry of Finance in Iraq there are 5 revenue enhancement classs that presently being implemented, which are: Corporation Tax, Personal income Tax, Social Security Contributions, Stamp Duty and Custom Duty and VAT/ Gross saless revenue enhancement which is presently non in consequence. Corporation Tax Income earned deemed to be earned in Iraq is capable to revenue enhancement. Corporation Tax is levied at a level rate of 15 % of the nonexempt net income, but for companies runing within the Oil Sector, a measure shall be passed to increase the rate of corporation Tax to 35 % of the nonexempt net income. Taxable net income is the reported net income as per fiscal statements adjusted by certain unallowable disbursals for revenue enhancement intents such as: Commissariats Personal non-business disbursals Dividend income Loss can be carried frontward for five old ages in order to countervail up to 50 % from nonexempt income of the subsequent old ages. Foreign Entities runing in Iraq in the signifier of a Limited Liability company or subdivision shall be treated in the same mode indicated for revenue enhancement intents. Personal Income revenue enhancement and Social Security Contributions Personal Income revenue enhancement rates are 3-15 % based on the single nonexempt income. Taxable income is the income earned by an person after subtracting allowable points such as, personal allowances, kid allowances, every bit good as other deductible freedoms such as nutrient, adjustment, conveyance and hazard allowances. Income revenue enhancement paid abroad on behalf of an exiles employed in Iraq shall be off set against personal income revenue enhancement liability incurred in Iraq. Staff Personal income has to be settled on a monthly footing, as it s the responsibility of the employer to roll up the revenue enhancement from the employees and direct it to the concerned revenue enhancement authorization in this regard, In order to avoid punishments. The employee s societal security part is 5 % of the basic wage, while the employer s part is 12 % . Social Security paid abroad for expatriate forces runing in Iraq may be off set against their liability for societal security as a consequence of their employment in Iraq. Custom and Stamp Duty About all imported stuffs except nutrient and really limited types of stuffs are capable to 5 % reconstructing Iraq fees. In add-on, 1 % export fees imposed on just market value besides the local authorities can enforce extra fees of 1 % to 2 % from the just market value of the imported goods and stuffs, if such goods will be used inside of such district. Stamp Duty may be imposed upon sign language of contracts with governmental entities. The current rate is 0.2 % of the value of the contract, unless the contract itself stipulates that it is exempt from stamp responsibility. Future Plans on Accounting Policies Iraq is non included in the list of states that are utilizing the International Financial Reporting Standards as a footing for the accounting regulations to be implemented. Uniform accounting is going irrelevant and a new accounting attack is needed. The inquiry that needs to be addressed is which accounting system is best suited for usage in new Iraq. International accounting criterions may be considered as a good option. ( Alnajjar, 2004 ) Since 1990 s a series of 14 accounting criterions were announced slackly based on IFRS. But these accounting criterions have fallen behind, one of which is the Standard on research and development costs ( IAS 9 research and development costs ) , an international accounting criterion that no longer exists since it was replaced by IAS 38 Intangible assets. ( Al Bawaba,2010 ) In 2009, the cardinal bank of Iraq pre-announced its purpose of change overing the Fiscal Statements into IFRS. Late last twelvemonth, in audience with the IMF and the World Bank, Iraq has adopted a three-year action program that identified precedence steps in the countries of budget readying, executing and coverage ; hard currency direction ; public procurance ; and the accounting model. Specifically: To better budget readying, Iraq will clearly specify precedences, set ceilings in the budget handbill for current and investing disbursement in line with a sustainable medium-term budget scheme, and develop overall sector schemes To beef up coverage and hard currency direction, Iraq will necessitate passing units to subject studies on all disbursement including investing, progresss, and letters of recognition no subsequently than two months after the terminal of each month, and to accommodate these sums with the hard currency balances at the beginning and terminal of the coverage period. Cash releases will be approved merely after the Ministry of Finance has reviewed the study from three months before. This will cut down the idle balances in passing units histories to the lower limit required to guarantee the continuity of authorities operations. Furthermore, by end-March 2010 Iraq will reexamine all histories in the banking system that are classified as cardinal authorities histories and accommodate them with Treasury records, and will return any idle balances received from the budget to the cardinal Treasury. With respect to progresss, Iraq will reexamine the outstanding stock of progresss to place those that are recoverable and put a clip agenda for their recovery and for composing off unrecoverable progresss based on appropriate mandate at a high degree. Iraq will fix a elaborate study to document the consequences of the reappraisal. The footing on which debts have been classified as recoverable or unrecoverable, and actions taken to retrieve dubious sums before urging that they are written-off will be clearly specified. To beef up internal audit and control systems, Iraq will re-examine its internal policies and processs at the Ministry of Finance, every bit good as the accounting systems, procedures and internal controls used by the accounting section ; and reexamine the internal controls of the largest passing units runing systems. To beef up the quality of its investing docket and speed up the Reconstruction of Iraq s substructure, Iraq will inquire the Board Supreme Audit ( BSA ) to reexamine the largest investing undertakings financed with 2008 budget allotments. This audit study will measure the standards for O.K.ing capital investing undertakings: whether a cost benefit analysis was carried out ; the procurance procedure: whether it conformed to international criterions of transparence and fight ; and the undertaking direction procedure: whether the undertakings were delivered on clip and within budget. The study will supply recommendations that could be used in the undermentioned budgeting procedure to heighten the docket on public investing. Iraq will besides set about an appraisal of the functionality of the Iraq Financial Management Information System ( IFMIS ) developed with the aid of USAID, and do the alterations required to guarantee that this system is to the full operational ( with the inclusion of a committedness control system and the ability to bring forth regular comprehensive studies in line with best patterns ) in 2011. Iraq will go on to subject to the BSA and to the Council of Representatives the concluding histories for each financial twelvemonth no subsequently than September 30 of the undermentioned twelvemonth. The BSA has already completed the audit of the concluding histories of the federal budget for 2005-06, and it is reexamining the 2007 and 2008 histories. To avoid the obstructions Iraq has encountered last twelvemonth in informations aggregation for the nose count of public service employees, Iraq has narrowed the coverage to include all cardinal authorities employees that work outside of security related countries. Iraq will do all attempts to hold the nose count completed by September 30, 2010. After completion of the nose count, Iraq will travel fleetly to extinguish shade workers and follow an action program aimed at developing a computerized human resource database and a computerized paysheet system, as a first measure toward comprehensive civil service reform. In analogue, the BSA has begun a undertaking to verify the forces records in the line ministries in order to clean up the bing paysheet. Tax Reforms Iraq has made some advancement in developing a medium-term revenue enhancement reform scheme with the aim of streamlining the revenue enhancement system, broadening and diversifying the revenue enhancement base, and increasing gross aggregation. As a first measure, in 2008 Iraq has introduced a nomadic phone revenue enhancement. Looking in front, Iraq plans to present a gross revenues revenue enhancement in the coming old ages as a precursor for a value-added revenue enhancement, and is besides sing cut downing the figure of income revenue enhancement brackets. Iraq has will seek proficient aid from the IMF and other international spouses to back up its revenue enhancement reform attempts. Iraq will press the Council of Representatives to follow the new imposts jurisprudence that will set up a transparent and efficient duty system with fewer freedoms. Decision Iraq being a 3rd universe state and an Arab state makes their accounting pattern really particular and different from other states patterns. But from the research, Iraq s status did non straight affect the accounting pattern and alternatively proved the dynamism of Accounting as it was able to accommodate to Iraq s state of affairs amidst the nuisance that was caused by the series of wars and of oppressive leading. Besides, although accounting in Iraq is chiefly used for revenue enhancement ordinance, Iraqi Accounting Standards and policies need to be refurbished because they have already fallen behind other 3rd universe states in an Arab State. They should change over their criterions in conformance with IFRS to take their opportunities on Globalization and resuscitate their Civilization. This is peculiarly of import in the fiscal services sector. The internationalisation of accounting criterions has been driven by the globalisation of capital markets. There were major additions in cross-border capital flows over the past few decennaries. This means that investable capital can travel more rapidly and expeditiously to the most attractive investing chances worldwide. Increasingly, planetary investors are rousing to Iraq s investing potency. But barriers exist to using capital. Percepts about security remain a job. Modernization of the fiscal substructure needs to go on. Laws and ordinances need farther updating. And Iraq needs eloquence in international criterions for fiscal coverage. A A A