New Accounting Standards Cost Saudi $1.3b, but Feared Accountant Shortage Avoided

Writing in Forbes, contributor Dominic Dudley notes that Saudi Arabia’s January 2017 switch to new accounting standards did not cause chaos in the Kingdom’s affected listed companies as feared, but it did cost some companies a pretty penny.

Saudi Arabia’s switch from accountancy standards set by the Saudi Organization for Certified Public Accountants (SOCPA) to International Financial Reporting Standards (IFRS) was required for companies listed on the Saudi Stock Exchange. “The biggest,” Dudley writes, “appears to be the reductions that listed companies have been making to their retained earnings – the proportion of net income kept by a company for reinvestment or to pay debts, rather than being paid out in dividends.”

TASI April 2017

Saudi Arabia’s Stock Market as of April 2017, via Jadwa Investment.

Under CMA rules, companies have to “report any significant effects that result from the adoption of IFRS as soon as they know about them. The main cause of the cuts reported so far has been the differing methods of dealing with impairments, with the IFRS taking a more conservative stance than the Socpa standards,” Dudley writes.

Among the companies Dudley notes have suffered sizable losses:

-Saudi Arabian Mining Company (Maaden) with SR2.9bn ($773m) in losses

-Saudi International Petrochemical Company (Sipchem) with SR486m ($130m) decrease in its retained earnings

-Savola Group, which has flagged up a SR330m ($88m) adjustment.

Click here to read the report in Forbes