In the last few decades, Dubai has witnessed an enviable transformation in terms of creating a conducive and inclusive business environment. Not only has the city played a pivotal role in helping the government realize its policies of economic diversification, but it has also been the cynosure of several other plans charted out by the government in order to streamline and systematize the country’s economic growth. One such body that has been forwarding its goals is Dubai Development Authority (DDA). It was formerly called Dubai Creative Clusters Authority (DDCA), which was brought into being with the aim of creating an appealing and encouraging business environment that would help in improving financial competitiveness and set a global standard for businesses across sectors.
To ensure this, DDA made the submission of audited financial statements mandatory for all business entities registered with the authority so that there was absolute clarity about where the economy was heading. Under this provision, all businesses must maintain their accounting records and books for at least eight years after the date or a date that the registrar prescribes. The DDA also prescribes that the accounts must comply with the accounting principles or the standards approved by the Registrar. The financial statements must hence be prepared following International Accounting or International Financial Standards as UAE doesn’t have its own accounting standards.
Who needs to submit audited financial documents?
As per the legal requirements, whether a company needs to submit audited financial documents will completely depend on the jurisdiction of where the company is located. According to the latest provisions, the requirements are:
● Every company must invite more than one auditor to audit their documents
● The company must keep the annual financial accounting ready. This includes a balance sheet, and a profit and loss account
● International Accounting Standards and Practices should be applied by the companies for a clear understanding of net profit and loss
● All companies incorporated in free zones must comply with the requirements of their respective free zones
● Your company type will also make a difference. For example, any branch of a foreign company must get its financial documents audited
Benefits of keeping audited documents ready
The authorities in Dubai make submission of audited financial documents a mandate for a reason as there are definite benefits of doing that:
- Determines the correct financial situation of a company. It also determines the reliability of the financial information provided by the company
- Audits help organizations investigate and assess any financial risks they might face
- Auditing financial reports will analyze if the business is viable or not. When auditors audit the financial reports in UAE, they are expected to evaluate and assess if the business is capable of revenue and profit generation. This helps the government make better-informed decisions about supporting such businesses
- Auditing the financial reports also helps organizations find out newer ways of improving their business as auditors can show them the right way forward
- Auditing makes an organization more credible and trustworthy, which increases its chances of getting more investment and financial support from other organizations as well as the government
Mandatory content to include before the Submission of Audited Financial Statements to DDA
Financial reports are important documents and they help the government analyze the individual financial capabilities of an organization and collectively that of the country. So, it is important not to miss out on providing the right information. So, your financial reports must include:
- A statement indicating the profit and loss during the financial year
- A statement of equity and retained earnings or deficit
- A balance sheet at the end of the financial year
- Notes to all the financial statements
The organization must also submit a copy of its financial statements the report given by the auditor to the Registrar within seven days of the annual general meeting when audited financial statements are submitted.
When must you submit your financial reports to the DDA?
The DDA had mandated that every company under its legislation must provide the latest audited financial report along with the summary sheet before or on October 31, 2022. The DDA also prescribed a particular format in which the documents must be submitted. The authority had also asked all companies that they must continue submitting the said documents every year within 6 months from the end of the financial year. It should be submitted through the AXS portal to the DDA and it must consist of the following:
- Account of profit and loss: Gross profit, revenue, cost of sales, operating profits, operating costs, depreciation, amortization, interest expenses, net profit, and other income/loss
- Balance sheet: Fixed assets current assets, other assets, investments, current liabilities, long-term liabilities, retained earnings, share capital, and reserve and surplus
If an organization fails to be compliant with the rules and regulations laid out by the DDA, it may attract a fine and lead to the non-renewal of its license. If things go as planned, the mainland licensing authorities and free zones across the UAE will make submitting the audited financial statements annually a mandate. Corporate tax laws and other laws are expected to be introduced to closely monitor business activities throughout UAE. The government is hopeful that the introduction of these laws will enable better financial planning and development.