Corporate Governance and Accounting Expectations in Oman: An Empirical Study on Methods


In latest decades, the Oman financial system has undergone a variety of reforms, resulting in a more marketplace-oriented economic climate. Particularly, the financial impetus extended by the Sultanate of Oman had signaled the starting of a positive craze. The measurement of Oman industry is starting to be substantially even larger and the expectations of numerous worried parties are also escalating, which can be satisfied only by good Corporate Governance.

The value of very good Company Governance has also been more and more regarded by the industry for bettering the firms’ competitiveness, much better company effectiveness and superior relationship with all stakeholders(1). In oman also the industries have obliged to reform their rules of Governance, for which, Oman corporations will now be demanded to make extra and extra elaborate disclosures than have been producing hitherto. This necessiates to adhere to the uniform and proper accounting specifications, as the standards lessen discretion, discrepancy and enhances not only the diploma of transparency in sharing of info with the parties anxious but also reinforces the broader position the directors require to enjoy for obtaining Company objectives in the midst of difficulties and adversities.

Below, the Corporate Governance is a voluntary, ethical code of business anxious with the morals, ethics, values, parameters, carry out and habits of the company and its management. The company duty begins with the directors who are the thoughts and soul of a firm.

The Board is anticipated to act as conscience-keeper of the company vision and mission, and devise the right form of devices for organizational performance and gratification of stakeholders. As a result, the Corporate Governance is a system of accountability mostly directed toward the shareholders in addition to maximizing the shareholders’ welfare(2), the place the discussion on disclosure/ transparency concerns of Corporate Governance at some point centres close to the suitable accounting standards and their techniques and troubles, as the application of accounting specifications give a great deal of self esteem to the company management and make the disclosure a lot more efficient and make sure the excellent Company Governance to endorse a healthier expense local climate.

Therefore, the study of methods of accounting specifications is an essential and suitable issue of superior Company Governance in the current environment, as the standards are considered as a complex response to phone for much better financial accounting and reporting or as a reflection of a society’s altering anticipations of corporate actions and a car or truck in social and political checking and control of the enterprise(3).


The outdated means of selective and conservative reporting is yielding put to extra clear and voluntary disclosures, in tune with the changing times. There is no alternative to adopting by the company entities of new specifications of accountability, wherever the accountability is mostly a make a difference of disclosure, of transparency, of describing a company’s routines to individuals to whom the company has tasks(4) i.e. the disclosure in simple, comprehensible and similar type, varieties obviously the foundation for accountability, which can be furnished only if businesses undertake uniform accounting insurance policies and disclose sufficient information and facts about the accounting expectations followed. Consequently, accounting specifications be certain the in depth disclosure of the corporate’s accountability, which may possibly be regarded as a key situation and a pre requisite for superior Company Governance.

An examination of practices of accounting benchmarks, and their issues in Oman industry may possibly assist to have an understanding of the present techniques of accounting requirements, which in turn aid in planning the helpful standard tactics so as to guarantee superior Corporate Governance foremost to a healthful investment surroundings.

In this context, an endeavor is made right here to analyze the accounting benchmarks and their tactics in Oman, with a see to bolster the accounting benchmarks and boost their procedures for good Corporate Governance. The facts for the study are attained from the yearly reviews (posted all through 2001-’02) of 10 Omani corporations of different mother nature, chosen from the top corporations in conditions of assets. The sample consisted of 6 private and 4 community providers. The easy for each centage method is utilised to review the details. The authenticity of the info is verified with the thoughts of management, who are mindful of the company affairs and Company Governance. The corporates’ perceptions on the relevance of accounting benchmarks for very good Company Governance in the context of Oman are also examined.

Criteria IN OMAN:

In any region, the awareness and competitiveness amid the corporates would be strengthened when they comprehend each individual other and examine their performance, for which the uncomplicated, understandable and comparable disclosure is an critical instrument. The major objective of disclosure would be fulfilled and the utility of the disclosure in direction of excellent Company Governance would be improved when the disclosure is performed on the basis of uniform and steady accounting specifications. Thus, the advancement and the observe of uniform accounting requirements has develop into an crucial component of Company Governance and the many bodies have been contributing their knowledge to reinforce the specifications to make the Corporate Governance far more successful in the context of the shifting company environment. The company management is also now emotion the pressure for reforming accounting techniques and level of transparency emanating from alert lenders, regulatory businesses, financial analysts and higher than all, board of administrators who recognize that it is the quality of information which will identify how effectively they have discharged their duties to the very good Corporate Governance.

In Oman, although the financial statements have been geared up in accordance with Intercontinental Accounting standards issued by the Worldwide Accounting Requirements Committee (IASC), interpretations issued by the Standing Interpretation Committee of the IASC and the demands of the Business Corporations Regulation of the Sultanate of Oman and the disclosure specifications set out in the rules for disclosure issued by the Capital Sector Authority of the Sultanate of Oman, the disclosure is inadequate and is a negative phenomenon to a state which wishes to be strengthened more, because it simply cannot hope to tap the GDR current market with inadequate financial disclosures, considering that the extra transparent functions of a company governed by the proper accounting specifications, the far more precisely will its securities be valued(5).

The International Accounting Specifications followed in Oman industry are Presentation of Financial Statements (IAS 1) Inventories (IAS 2) Cash Flow Statements (IAS 7) Net Profit or Loss for the period (IAS 8) Basic Glitches & Variations in Accounting insurance policies (IAS 9) Activities Just after the Balancesheet Date (IAS 10) Design Contracts (IAS 11) Income Taxes (IAS 12) Segment Reporting (IAS 14) Consequences of Altering Price ranges (IAS 15) Property, Plant and Devices (IAS 16) Leases (IAS 17) Revenue (IAS 18) Employment Gains (IAS 19) Accounting for Govt. Grants & Govt. Assistance (IAS 20) Consequences of Modifications in International Trade Costs (IAS 21) Business Mixtures (IAS 22) Borrowing Prices (IAS 23) Relevant Occasion Disclosures (IAS 24) Retirement Reward Options (IAS 26) Consolidated Financial Statements (IAS 27) Investments in Associates (IAS 28), Hyperinflationary Economies (IAS 29) Banking companies & Identical Financial Institutions (IAS 30) Interests in Joint Ventures (IAS 31) Financial Devices: Disclosure & Presentation (IAS 32) Earnings Per Share (IAS 33) Interim Financial Reporting (IAS 34) Discontinuing Operations (IAS 35) Impairment of Assets (IAS 36) Provisions, Contingent Liabilities & Assets (IAS 37) Intangible Assets (IAS 38) Financial Instruments: Recognition & Measurement (IAS 39) Investment Property (IAS 40) Agriculture (IAS 41).

Though the Oman industry has been following all the International Accounting Requirements, in practice, some of them are not totally free from criticism thanks to particular inherent weaknesses. The methods of these standards in the Oman industries and the gaps are discussed in what follows with a look at to improve them for guaranteeing the good Corporate Governance.


The principal and secondary facts collected from the pick firms are carefully examined to uncover the extent of compliance with the accounting criteria and difficulties in company tactics. Some of the significant conclusions are as follows:

i) Perceptions on the relevance of Accounting Standards for Company Governance: Except 1 sample of private companies which has not disclosed its viewpoint, all other folks (90% of the sample) have expressed the accounting standards as a lot more applicable for Corporate Governance.

ii) Procedures of Accounting Guidelines Disclosed in Once-a-year Reports: The greater part of the sample corporations (80%) disclosed 20 to twenty 5 policies and the remaining is similarly distributed in between significantly less than 20 and extra than twenty 5 criteria disclosed by the select providers. All the decide on public limited corporations have complied with twenty to 20 5 accounting benchmarks.

iii) Techniques of Inventory Valuation: The sample organizations have adopted either the lessen of value or net realisable value or transferring normal strategies for the inventory valuation.

iv) Methods of Planning of Cash Flow Statement: All the pick out firms have introduced cash flow and changes in equity statements.

v) Company Techniques of Depreciation: The research uncovered that the greater part of the sample organizations (90%) have followed straight line technique for the computation of depreciation and the remaining adopted diminishing value strategy. Further more examination exposed that all sample general public companies followed the straight line method of depreciation.

vi) Methods of Construction Contracts: The sample is composed of a person construction company, which has adopted for each cent of completion method.

vii) Tactics of Research & Enhancement: None of the pick out organizations has disclosed the expenditure on research and progress.

viii) Tactics of other Benchmarks: The examine revealed that the accounting methods related to elementary glitches and modifications, effects of altering costs, business combinations, hyperinflationary economies, financial statements of financial institutions and similar financial institutions and agriculture have been not disclosed by any of the select firms as the corporations are not concerned with these kinds of functions.

From the analyses of techniques and typical conversations, some of primary difficulties of accounting criteria in the context of Oman are identified and offered listed here under in temporary.


i) Disclosure of Accounting Guidelines is adopted by most of the sample businesses, since it is mandatory. The things said below accounting procedures or notes are extra or significantly less exact in all the worries chosen for the examine, but the remedy of some objects were not comparable to the other issues.

The need of the disclosure standard is only to disclose the substance info, what is the substance or immaterial it would be made a decision by the business, exactly where the impact of individual judgement is expected in the absence of concrete recommendations. Therefore, the existence of the normal is doubtful.

ii) In couple of accounting criteria, these as, valuation of inventories and depreciation accounting, the choice accounting remedy is permitted. This kind of versatility creates challenges in judging the excellent and dependability of financial statements of an business and the unique procedures are adopted for diverse corporations or for various intervals, the likelihood of inter-unit, intra-industry or inter-period comparison is impaired. The absence of comparability renders the financial facts fewer handy and makes confusion in the minds of the investing public.

iii) In circumstance of construction contracts, the normal offers for adoption of possibly completed deal approach or share of completion method for recognition of profit on concluded deal, which appeals to the identical limitation of comparability.

iv) The hybrid approach of accounting i.e. accounting for earnings on cash basis and expenditure on accrual (mercantile basis), adopted by corporates, conveniently lets them to manipulate their experiences.

v) The standards setting method is closed and slender and the execution is unsound , that leads to the many procedures and imperfect disclosure, which defeats the prime objective of accounting specifications in attaining the excellent Company Governance.

vi) The adoption of IAS in toto without having seeking into their relevance in the context of Oman industrial natural environment, lacks the concentration on the domestic issues and indigenisation.

The pursuing suggestion are made on the foundation of conversations with the corporates to fix the higher than challenges and to strengthen the utility of accounting expectations for guaranteeing fantastic Company Governance.


i) The most essential recommendation for strengthening the accounting expectations to increase the good quality reporting therefore Company Governance values, is concentrating on the community conditions, improving the relevance i.e. indigenisation of accounting specifications to make the specifications far more suitable or appropriate to the present industrial phenomenon in Oman.

ii) The Capital Sector Authority in Oman in consultation with other gurus and regulatory bodies need to evolve some mechanism to limit the scope of substitute methods accessible in just an accounting typical. Thus,the use of uniform accounting expectations would increase the qualitative and comparability dimensions of financial statement and reporting.

iii) The establishment of harmony amongst the relevant guidelines like Organizations Act, Revenue Tax Act, Banking Rules etc., which have important bearing on diverse objects of financial statements, would give legitimate and fair watch of business.

iv) The formulation of comprehensive and indigeneous benchmarks, like accounting for alterations in rates, inflationary economies, segment accounting, accounting for joint ventures, earning for every share, expense in subsidiaries, associates and many others., useful to make accounting expectations additional consumer helpful and global satisfactory.

To sum up, though the whole industrial local community in Oman has been subsequent the Global Accounting Specifications and adopting disclosure practices to ensure legitimate and truthful see of the economic routines, nonetheless a ton a lot more requirements to be completed to advertise great corporate governance and a balanced financial investment local weather. The other center east countries, which undertake the coverage of liberalization and intend to boost in worldwide capital market things to do because of to globalization must understand that cutting down the wide range of approaches in the each individual accounting benchmarks, formulating the in depth and indigeneous specifications and making all accounting specifications as obligatory have to be specified major precedence for attaining the necessary goals, or else it will be exceedingly challenging for Oman investors to trust the Company Governance.

* The posting is presented in Accounting, Commerce & Finance: The Islamic Point of view Worldwide Convention V, held in Brisbane, Australia all through 15-17, June 2004.


1. Tiwary, Ojha, Arun Kumar, “Corporate Governance in India: What it Signifies and What it wants?”, The Indian Journal of Commerce, New Delhi, Oct-Dec,1998, p.154.

2. Chandratre, KR, “Job of Board of Directors in Emerging Proportions of Corporate Governance and Impending Variations in Company Legislation, The Chartered Secretary, The Institute of Chartered Secretary of India, New Delhi, May 97, p. 505.

3. R.I.Ticker, “Corporate Obligation, Institutional Governance and the Roles of Accounting Specifications” in Michael Bromwich and Anthony G. Hopwood (Eds.), Accounting Standards Placing, An Worldwide Perspective, Pitman Books Ltd., London, 1883, p.27., Cited in Lele RK, Jawahar Lal, “Accounting Principle”, Himalaya Publishing Home, New Delhi, 96,p.56.

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

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

6. Verma, Garg, Singh, “Disclosure of Accounting Specifications Vis-à-vis Company Features: A Research of Indian Corporate Sector”, The Indian Journal of Commerce, New Delhi, Oct-Dec,1998, p.131.