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Financial Reporting Regulatory Environment of Saudi Arabia

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fahda alshathry

on 17 September 2013

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Transcript of Financial Reporting Regulatory Environment of Saudi Arabia

Financial Reporting Regulatory Environment of Saudi Arabia
Balnce sheet
Accounting standards in Saudi Arabia
The framework for financial reporting in Saudi Arabia
Financial performance
5 accounting policies
Saudi Arabian Monetary Agency (SAMA), the central bank of the Kingdom of Saudi Arabia.
Established in 1952.
Accounting standards in Saudi Arabia
Sabic’s financial performance
Sabic's Annual Report
Sara Al Shathri
Sara Al Khelaiwi
Nouf Al Hussein
Reem Al Babtain
Fahda Al Shathri
Issuing the national currency, (Saudi Riyal)
Acting as a banker to the government.
Supervising commercial banks.
Managing the Kingdom’s foreign exchange reserves.
Conducting monetary policy for maintaining price and exchange rate stability.
Promoting financial system growth and ensuring its soundness.
Supervising Cooperative Insurance Companies and Insurance-Related Freelance Firms.
Supervising Finance and accounting Companies.

SAMA has issued Principles of Corporate Governance for companies operating in Saudi Arabia, in accordance with the best practices recognized internationally. The members of the Board of Directors must apply these Principles, in addition to understanding the related risks, and ensuring that capital adequacy ratios and provisions are commensurate with the size of risks and levels of liquidity and lending, there by, ensuring the protection of depositors rights as well as the rights of shareholders and stakeholders.
The Principles are intended to assist corporations in enhancing their corporate governance frameworks, and to help Board members and senior managers to oversee their activities.
SAMA issued a circular to corporations regarding: "Requirements for Operating in Saudi Arabia" that aimed to ensure that board directors and senior management enjoy integrity, honesty, disclosure, and good reputation at all times.

Balance Sheet:
The SAMA balance sheet is denominated in Saudi Riyals, which is pegged at an official rate of 3.75 against the US dollar. All currency notes issued by SAMA are fully backed by equivalent gold deposits.
5 of Sabic’s accounting policies:
Cash and cash equivalents
Cash and cash equivalents include cash on hand, bank balances, short-term deposits, demand deposits and highly liquid investments with original maturities of three months or less.
Accounts receivable
Accounts receivable are stated at the invoiced amount less any provision for doubtful debts. An estimate for doubtful debts is made when the collection of the receivable amount is considered doubtful. Bad debts are written off as incurred.

Inventories are stated at the lower of cost or market value. Cost of raw materials, consumables, spare parts and finished goods is principally determined on a weighted-average cost basis. Inventories of work in progress and finished goods include cost of materials, labor and an appropriate proportion of direct overheads.
Short-term investments
Short-term investments with maturities of more than three months but less than a year are included under current assets. Income from these investments is recognized on an accrual basis.
Accounts payable and accruals
liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the suppliers and service providers or not.
Sabic’s financial performance
“Our results in 2012 revealed the true strength of SABIC. Despite extremely challenging market conditions, we maintained a strong financial performance.” Sabic’s Annual report shows that they are a sustainable company with consistent returns and income.
The consolidated balance sheet:

The consolidated financial statements are prepared under the historical cost convention -An accounting technique that values an asset for balance sheet purposes at the price paid for the asset at the time of its acquisition.
- using the accrual basis of accounting and the going concern concept, except for the measurement at fair value of available for sale investments and derivative financial instruments.

Sabic’s performance snapshot in 2012:
The banking and insurance regulator requires all Saudi Arabian banks and insurance companies whose shares are listed on the Saudi Stock Exchange to publish financial statements in conformity with IFRSs.
Even though Saudi Arabia is willing to comply with IFRS, and audit reports state compliance with IFRS, it IFRS has not permitted Saudi Arabia yet.
Saudi Organization for Certified Public Accountants (SOCPA):
All other listed companies in the Kingdom of Saudi Arabia, as well as unlisted companies, must follow accounting standards generally accepted in the Kingdom of Saudi Arabia as issued by the Saudi Organization for Certified Public Accountants (SOCPA).
Review, develop and approve accounting standards.
Review, develop and approve auditing standards.
Establish the necessary rules for fellowship certificate examination (CPA exam.) including professional, practical and scientific aspects of audit profession and applicable regulations.

The framework for financial reporting in Saudi Arabia
Accounting practices in Saudi Arabia are regulated by three laws: the Company Law, Accountancy Law, and Income Tax and Zakat Law.
SABIC is the Saudi Basic Industries Corporation, Headquartered in Riyadh, Saudi Arabia. It is a diversified manufacturing company, active in chemicals and intermediates, innovative plastics, polymers, fertilizers and metals.
2nd largest diversified chemical company in the world
40,000 employees
80+ gobal operation
150 new products each year
SABIC is a public company . 70% of the Company’s shares are owned by the Saudi Arabian government, with the remaining 30% held by private investors in Saudi Arabia and other countries of the Gulf Cooperation Council
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