Decree of Amendments In the Egyptian Accounting Standards
In the second week of March 2023, the Prime Minister issued Decision No. 883 of 2023 regarding the amendment of Egyptian accounting standards, an amendment to the Minister of Investment’s Decision No. 110 of 2015 regarding Egyptian accounting standards and its amendments, and on what was presented by the Chairman of the Board of Directors of the General Authority for Financial Supervision.
Table of Contents
Terms of the decree
The decision of the amendment of the accounting standards stipulated the following:
- It shall be replaced by the preliminary appendix contained in the Egyptian Accounting Standards issued by the Minister of Investment Decision No. 110 of 2015 referred to.
- The criteria shall be replaced by numbers (10) fixed assets and their depreciation, (23) intangible assets, (34) real estate investment, (35) agriculture, and (36) exploration for mineral resources, from the aforementioned Egyptian accounting standards, the standards accompanying this the decision.
- Added to the aforementioned Egyptian accounting standards, a new standard No. (50) insurance contracts, as attached to this decision.
- Accounting Standard No. (37) Insurance Contracts cancels the aforementioned Egyptian accounting standards.
The decision was made on March 6, 2023.
First: The most important points of departure from the International Financial Reporting accounting Standards
- Dividend distributions to employees and members of the Board of Directors are not included as an expense in the income statement, but are recorded as a distribution of profit in accordance with the legal requirements.
- The impact of this on each of the Egyptian Accounting Standard No. (22) “Earnings Per Share” and the Egyptian Accounting Standard No. (38) “Employee Benefits”.
Second: New accounting standards issued for the first time during the period from 2019 to 2023:
1. Egyptian Accounting Standard No. (47) “Financial Instruments” 2019
2. Egyptian Accounting Standard No. (48) “Revenue from Contracts with Customers” 2019
3. Egyptian Accounting Standard No. (49) “Leasing Contracts” 2019
The following amendments must be made to Standard (49) issued during 2019 as a result of the amendment and re-issuance of Egyptian Accounting Standard No. (10) “Fixed Assets” amended 2023, and they shall be effective from the effective date of the amendments of the Egyptian accounting standards. (10).
Paragraph (35) of Standard (49) shall be added as follows:
- If the usufruct asset is related to one of the classes of fixed assets to which the lessee applies the model Revaluation contained in Accounting Standard No. (10) “Fixed Assets” The lessee can choose Apply the revaluation model to all usufruct assets related to that class of fixed assets.
Adding paragraph No. (57) to Standard (49) as follows:
- 57. If the lessee measures the right-of-use assets at amounts revalued in application of the applicable accounting standard (10), the lessee must disclose the information required by paragraph 77 of the accounting standard Fact No. (10) of these usufruct assets.
Amending Paragraph No. (56) of Standard (49) to become:
- If the ‘usufruct’ assets are equal to investment property, the tenant must apply the requirements
- The reform mentioned in the Egyptian Standard No. (34) “Real Estate Investment”, and in this case, it is not required, it is required to submit the reforms contained in Paragraph 53 (a), (f), (h), or (j) of the “assets beneficial right” that.
4- Egyptian Accounting Standard No. (50) “Insurance Contracts” 2023
This standard defines principles for recognition of insurance contracts within the scope of this standard, and prescribes their measurement, presentation and disclosure. The standard’s objective is to ensure that the entity provides appropriate information that faithfully represents those contracts. This information provides users of the financial statements with the necessary basis for evaluating the impact of those insurance contracts on the entity’s financial position, financial performance and cash flows.
Third: Existing accounting standards or part of the accounting standards that have been withdrawn (cancelled) and replaced by new accounting standards versions 2019 and 2023
1- The new Egyptian Accounting Standard No. (47) “Financial Instruments” replaces the corresponding topics in the Egyptian Accounting Standard No. (26) “Financial Instruments: Recognition and Measurement”, and therefore the Egyptian Accounting Standard No. (26) was amended and re-issued after withdrawing the special paragraphs The topics dealt with in the new Standard (47) and define the scope of the amended Standard (26) to deal only with limited cases of hedge accounting according to the facility’s choice.
2- The new Standard Accounting Standard No. (48) “Returns from Contracts with Customers” replaces and cancels the following standards:
- Standard Accounting Standard No. (8) “Establishment Contracts”, amended 2015
- The Egyptian Accounting Standard No. (11) “Revenue” amended 2015
3- The new Standard Accounting Standard No. (49) “Lease Contracts” replaces Standard Accounting Standard No. (20)
Accounting rules and standards related to financial leasing operations 2015 and revoke it.
4- The new Standard Accounting Standard No. (50) “Insurance Contracts” replaces the revised Standard Accounting Standard No. (37) 2015 “Insurance Contracts”
When referring in the current Egyptian Accounting Standards that were issued in 2015 and that were not amended or re-issued to the accounting standards that were canceled when Standards No. (47), (48), (49) and (50) became effective, or on the date of their initial application, the Refer to the new standards 2019 and 2023 that they replaced.
Fourth: The 2015 standards have been amended and reissued to comply with the new accounting standards 2019 and 2023.
1- The final accounting standard No. (1) “Reviewing the financial statements” amended for 2019 (effective from the date of application of standard (47)
2- FAS No. (4) “Statement of Cash Flows” amended 2019, effective from January 1, 2019, except Paragraphs “40a” and “42a” to “42b”, which apply to girls starting on or after January 1, 2020, and it is allowed With the early application of these paragraphs, if the revised accounting standard No. (42) of 2019 was applied on the same date.
3- The final accounting standard No. (25) “Financial Instruments: Return” amended 2019 (effective from the date of application of the standard
(47).
4 – Standard Accounting Standard No. (26) “Financial Instruments: Recognition and Measurement” amended 2019 (effective from the date of
Standard application (47).
5 – Standard Accounting Standard No. (40) “Financial Instruments: Reforms” amended 2019 (effective from the date of application standard (47).
6- Egyptian Accounting Standard No. (35) “Agriculture” amended 2023 (effective from January 1, 2023).
Fifth: Current accounting standards that have been amended and reissued to address some special issues.
1- Egyptian Accounting Standard No. (38) “Employee Benefits”, amended 2019
Paragraphs 101a, 122a, 123a, and 179 were added, and paragraphs 57, 99, 120, 123, 125, 126, and 156 were amended. And adding a title before paragraph “122a” in order to amend the accounting rules for amending, reducing and settling the employee benefits system.
Standard No. (38) is the amendment of 2019 and it must be applied for financial periods beginning on or after January 1, 2020, and early application is permitted.
2- Egyptian Accounting Standard No. (42) “Consolidated Financial Statements”, amended 2019
Paragraphs related to the exclusion of investment entities from compilation have been added in paragraphs “27” to “33” to this standard, and paragraph No. “4” has been amended to confirm this.
Standard No. (42) is the amendment of 2019 and must be applied for financial periods beginning on or after January 1, 2020, and early application is permitted.
Based on the amendment of Standard No. (42), the following paragraphs have been added or amended (the amendments appear underlined) in the standards set out below to confirm the exclusion of investment entities from preparing consolidated financial statements, and these new or amended paragraphs must be applied on the effective date of the Egyptian Accounting Standard No. (42) “Consolidated Financial Statements”, amended 2019:
- Egyptian Accounting Standard No. (15) “Disclosure of Related Parties” Amendment to Paragraph “4”
- Egyptian Accounting Standard No. (17) “Independent Financial Statements”
- Egyptian Accounting Standard No. (18) “Investments in Associate Companies”
- Egyptian Accounting Standard No. (24) “Income Taxes”
- Egyptian Accounting Standard No. (29) “Business Combination”
- Egyptian Accounting Standard No. (30) “Interim Financial Statements”
- Egyptian Accounting Standard No. (44) “Disclosure of Shares in Other Entities”
Sixth: Issuance of Egyptian accounting standards Interpretation No. (1) “Public Service Privilege Arrangements” 2019
This interpretation provides guidance on the accounting by operators of public-to-private entity public service concession arrangements for the construction, operation, and maintenance of public utility infrastructure—such as power, bridges, tunnels, hospitals, airports, water distribution facilities, and power supply and network networks. Communication…, etc.
Interpretation No. (1) 2019 applies to financial periods beginning on or after January 1, 2019.
This Interpretation applies to arrangements of privileges for public services from a public entity to a private entity if:
- The grantor controls, or regulates, the services that the operator must provide through the infrastructure, to whom it must provide them, and at what prices.
- The grantor controls – through ownership, usufruct or otherwise – any significant remaining interest in the infrastructure assets at the end of the arrangement term.
This Interpretation sets out the general principles on the recognition and measurement of obligations and related rights in public service concession arrangements. This interpretation gives the investor the option to apply the previous treatment for public service concession arrangements existing before January 1, 2019 for the facilities that used to accept and measure the assets of these arrangements as fixed assets in accordance with FAS No. (10) “Fixed Assets and Their Depreciation” until their term expires. This is in contrast to the International Standards for Financial Reporting to allow entities that wish that the accounting policies used in preparing their financial statements not differ from the contractual arrangements or their business models.
Seventh: Options permitted by international accounting standards have been excluded or amended in Egyptian accounting standards Egyptian Accounting Standard No. (1) “Presentation of Financial Statements”
Egyptian Accounting Standard No. (1) “Presentation of Financial Statements”
The option of preparing a statement of comprehensive income as one statement has been excluded and the provisions of the applicable standards stipulate the preparation of a separate income statement (profits or losses) and a statement of comprehensive income.
Egyptian Accounting Standard No. (17) “Independent Financial Statements”
The paragraphs related to the alternative to using the equity method in the separate financial statements have been canceled and the consequent amendment of paragraphs “4” to “8” and paragraphs “10” and “12” of this standard.
Egyptian Accounting Standard No. (22) “Earnings Per Share”
The scope of application of the standard has been amended to become binding on the independent, consolidated or exhaustive financial statements of all entities.
Egyptian Accounting Standard No. (34) “Real Estate Investment”
All establishments were allowed to use either the cost model option or the fair value model option at the subsequent measurement of their real estate investments, with real estate investment funds only required to use the fair value model at the subsequent measurement of all their real estate assets.
With the recognition of the increase in the fair value upon the subsequent measurement of the real estate investment within the items of other comprehensive income, instead of profits or losses, and its collection within the equity in an account called “the real estate investment valuation surplus at the fair value” (Refer to Paragraphs 35 and 35a of the Egyptian Accounting Standard No. 34
Based on the previous amendments, the following paragraphs are added or modified in the standards set out below:
- Egyptian Accounting Standard No. (1) “Presentation of Financial Statements”
- Preliminary Accounting Standard No. (5) “Accounting causes, changes in accounting estimates and errors”
- Egyptian Accounting Standard No. (13) Effects of changes in foreign exchange rates
- Egyptian Accounting Standard No. (24) Income Taxes
- Egyptian Accounting Standard No. (30) Interim Financial Statements
- Egyptian Accounting Standard No. (31) Impairment of assets
- Egyptian Accounting Standard No. (31) “Impairment of Assets”
- Continuous Accounting Standard No. (32) “Current non-current assets held for the purpose of bio and non-continuing operations”
- Egyptian Accounting Standard No. (49) Lease Contracts
An appendix to preface the amendments to the Egyptian Accounting Standards 2023 will be published on the Financial Regulatory Authority and the Accountability State Authority
For more news
New Amendments to the Egyptian Accounting Standards in 2024
The Prime Minister, Dr. Mostafa Madbouly, issued Decision No. 636 of 2024 regarding developing some provisions of the Egyptian accounting standards, which aims at supporting establishments operating in various productive activities and enabling them to present their financial statements accurately.
The Objective of this Decision
This decision came within the framework of the authority’s keenness, which chairs the Permanent Committee for Egyptian Accounting Standards, to keep pace with international developments in this regard, meet the needs of markets and investors, and enhance transparency, oversight, and quality in the financial reports of various establishments, thereby enhancing Egypt’s business climate to attract investment flows.
What are the New Amendments to the Egyptian Accounting Standards in 2024?
This decision included the development of three Egyptian accounting standards:
- Egyptian Accounting Standard No. (17) Concerning Independent Financial Statements.
- Egyptian Accounting Standard No. (34) Concerning Real Estate Investment.
- Issuing a New Accounting Interpretation Regarding Carbon Emission Reduction Certificates.
Egyptian Accounting Standard No. (17) Concerning Independent Financial Statements
In the context of the constant pursuit of compatibility with international standards issued in August 2014, the new standard allows entities to use the method of equity accounting when assessing investments in subsidiary and associate companies in the independent financial statements, which increases the quality of financial information within the companies’ statements.
Egyptian Accounting Standard No. (34) Concerning Real Estate Investment
The fair value model has been added to this standard. According to the Prime Minister’s Decision No. 883 of 2023, article no. 30, the entity must choose either the fair value or the cost model in its accounting policy and apply it to all its real estate investments. According to article no. 35, if the book value of the real estate investment increases as a result of its evaluation at fair value, the increase must be recorded in other comprehensive income and collected within equity under the title of the real estate investment evaluation surplus at fair value.
The amendment has been made to include the difference in the evaluation of real estate investment on profit and loss statements, which increases the financial statements’ representation of the companies’ conditions, especially with the recent changes in exchange rates, while continuing to allow the possibility of recording this difference in the comprehensive income statement only once in the life of the asset or investment.
Issuing a New Accounting Interpretation Regarding Carbon Emission Reduction Certificates
Prime Minister’s Decision included adding an accounting interpretation for the first time that regulates the accounting treatment of carbon emission reduction certificates. It defines the scope of accounting treatment and procedures that management must take when determining the appropriate accounting treatment, including a sound understanding of the carbon certificate issuance cycle, the nature of the arrangement, and the commercial purpose of issuing or purchasing the certificate, as well as determining the classification of the certificate held as a financial asset or an intangible asset according to the commercial purpose and arrangement.
The new interpretation organized the determinants of accounting treatment according to various cases, including:
- Issuing the certificate in favor of the abatement project’s developer who is the owner, or issuing it in favor of the developer or financier of the project but who is not the owner.
- Purchasing a carbon certificate to use it to achieve carbon exchange.
- Purchasing a reduction certificate for trading.
FRA’s Chairman Statement Concerning this Decision
Dr. Mohamed Farid, FRA’s Chairman, announced that developing some provisions of Egyptian accounting standards is an essential step to help establishments operating in various productive activities follow accounting standards that help them present their financial statements with high quality and keep pace with the development of international standards.
He stressed that FRA supports the role played by Egyptian accounting standards in helping companies ensure that their financial statements clearly express their financial position and business results, which supports the validity of their position in making sound financing and investment decisions, pointing out the great importance of the new accounting interpretation regarding carbon emissions reduction certificates. It will significantly accelerate the pace of activating the voluntary carbon emission reduction certificate trading market, supporting the Egyptian government’s efforts to reduce carbon emissions.
And now you have shown everything related to the new amendments to Egyptian accounting standards in 2024. For more information about this decision, click here.
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