| RELEVANCE:In recent years, the Oman economy | | | | (80%) disclosed twenty to twenty five policies |
| has undergone a number of reforms, resulting in a | | | | and the remaining is equally distributed between |
| more market-oriented economy. Particularly, the | | | | less than twenty and more than twenty five |
| financial impetus extended by the Sultanate of | | | | standards disclosed by the select companies. All |
| Oman had signaled the beginning of a positive | | | | the select public limited companies have complied |
| trend. The size of Oman industry is becoming | | | | with twenty to twenty five accounting |
| much bigger and the expectations of various | | | | standards.iii) Practices of Inventory Valuation: The |
| concerned parties are also increasing, which can | | | | sample companies have adopted either the lower |
| be satisfied only by good Corporate | | | | of cost or net realisable value or moving average |
| Governance.The importance of good Corporate | | | | methods for the inventory valuation.iv) Practices |
| Governance has also been increasingly recognized | | | | of Preparation of Cash Flow Statement: All the |
| by the industry for improving the firms' | | | | select companies have presented cash flow and |
| competitiveness, better corporate performance | | | | changes in equity statements.v) Corporate |
| and better relationship with all stakeholders(1). In | | | | Practices of Depreciation: The study revealed that |
| oman also the industries have obliged to reform | | | | the majority of the sample companies (90%) |
| their principles of Governance, for which, Oman | | | | have followed straight line method for the |
| companies will now be required to make more | | | | computation of depreciation and the remaining |
| and more elaborate disclosures than have been | | | | followed diminishing value method. Further |
| making hitherto. This necessiates to adhere to the | | | | examination revealed that all sample public |
| uniform and proper accounting standards, as the | | | | companies followed the straight line method of |
| standards reduce discretion, discrepancy and | | | | depreciation.vi) Practices of Construction |
| enhances not only the degree of transparency in | | | | Contracts: The sample consists of one |
| sharing of information with the parties concerned | | | | construction company, which has followed per |
| but also reinforces the broader role the directors | | | | cent of completion method.vii) Practices of |
| need to play for achieving Corporate objectives in | | | | Research & Development: None of the select |
| the midst of challenges and adversities.Here, the | | | | companies has disclosed the expenditure on |
| Corporate Governance is a voluntary, ethical code | | | | research and development.viii) Practices of other |
| of business concerned with the morals, ethics, | | | | Standards: The study revealed that the |
| values, parameters, conduct and behavior of the | | | | accounting practices related to fundamental errors |
| company and its management. The corporate | | | | and changes, effects of changing prices, business |
| responsibility begins with the directors who are | | | | combinations, hyperinflationary economies, financial |
| the mind and soul of a firm.The Board is expected | | | | statements of banks and similar financial |
| to act as conscience-keeper of the corporate | | | | institutions and agriculture were not disclosed by |
| vision and mission, and devise the right type of | | | | any of the select companies as the companies |
| systems for organizational effectiveness and | | | | are not concerned with such activities.From the |
| satisfaction of stakeholders. Thus, the Corporate | | | | analyses of practices and general discussions, |
| Governance is a system of accountability primarily | | | | some of prime issues of accounting standards in |
| directed towards the shareholders in addition to | | | | the context of Oman are identified and presented |
| maximizing the shareholders' welfare(2), where | | | | here under in brief.ISSUES:i) Disclosure of |
| the debate on disclosure/ transparency issues of | | | | Accounting Policies is followed by most of the |
| Corporate Governance eventually centres around | | | | sample companies, since it is mandatory. The |
| the proper accounting standards and their | | | | items stated under accounting policies or notes |
| practices and issues, as the application of | | | | are more or less same in all the concerns selected |
| accounting standards give a lot of confidence to | | | | for the study, but the treatment of some items |
| the corporate management and make the | | | | were not similar to the other concerns.The |
| disclosure more effective and ensure the good | | | | requirement of the disclosure standard is only to |
| Corporate Governance to promote a healthy | | | | disclose the material facts, what is the material or |
| investment climate.Thus, the study of practices of | | | | immaterial it would be decided by the organization, |
| accounting standards is an important and relevant | | | | where the influence of personal judgement is |
| issue of good Corporate Governance in the | | | | expected in the absence of concrete guidelines. |
| present environment, as the standards are | | | | Therefore, the existence of the standard is |
| viewed as a technical response to call for better | | | | doubtful.ii) In few accounting standards, such as, |
| financial accounting and reporting; or as a | | | | valuation of inventories and depreciation |
| reflection of a society's changing expectations of | | | | accounting, the alternative accounting treatment is |
| corporate behavior and a vehicle in social and | | | | allowed. This kind of flexibility creates problems in |
| political monitoring and control of the | | | | judging the quality and reliability of financial |
| enterprise(3).STUDY:The old ways of selective | | | | statements of an enterprise and the different |
| and conservative reporting is yielding place to | | | | methods are followed for different companies or |
| more transparent and voluntary disclosures, in | | | | for different periods, the possibility of inter-unit, |
| tune with the changing times. There is no | | | | intra-industry or inter-period comparison is |
| alternative to adopting by the corporate entities | | | | impaired. The lack of comparability renders the |
| of new standards of accountability, where the | | | | financial information less useful and creates |
| accountability is largely a matter of disclosure, of | | | | confusion in the minds of the investing public.iii) In |
| transparency, of explaining a company's activities | | | | case of construction contracts, the standard |
| to those to whom the company has | | | | provides for adoption of either completed |
| responsibilities(4) i.e. the disclosure in simple, | | | | contract method or percentage of completion |
| understandable and comparable form, forms | | | | method for recognition of profit on completed |
| clearly the basis for accountability, which can be | | | | contract, which attracts the same limitation of |
| provided only if companies adopt uniform | | | | comparability.iv) The hybrid method of accounting |
| accounting policies and disclose adequate | | | | i.e. accounting for income on cash basis and |
| information about the accounting standards | | | | expenditure on accrual (mercantile basis), followed |
| followed. Thus, accounting standards ensure the | | | | by corporates, conveniently allows them to |
| comprehensive disclosure of the corporate's | | | | manipulate their reports.v) The standards setting |
| accountability, which may be regarded as a prime | | | | process is closed and narrow and the execution is |
| issue and a pre requisite for good Corporate | | | | unsound , that causes the various practices and |
| Governance.An examination of practices of | | | | imperfect disclosure, which defeats the prime |
| accounting standards, and their issues in Oman | | | | objective of accounting standards in achieving the |
| industry may help to understand the existing | | | | good Corporate Governance.vi) The adoption of |
| practices of accounting standards, which in turn | | | | IAS in toto without looking into their relevance in |
| help in designing the effective standard practices | | | | the context of Oman industrial environment, lacks |
| so as to ensure good Corporate Governance | | | | the focus on the domestic problems and |
| leading to a healthy investment environment.In | | | | indigenisation.The following suggestion are made on |
| this context, an attempt is made here to examine | | | | the basis of discussions with the corporates to |
| the accounting standards and their practices in | | | | solve the above issues and to improve the utility |
| Oman, with a view to strengthen the accounting | | | | of accounting standards for ensuring good |
| standards and improve their practices for good | | | | Corporate Governance.SUGGESTIONS:i) The most |
| Corporate Governance. The data for the study | | | | important suggestion for strengthening the |
| are obtained from the annual reports (published | | | | accounting standards to improve the quality |
| during 2001-'02) of ten Omani companies of | | | | reporting thus Corporate Governance values, is |
| different nature, selected from the top companies | | | | focusing on the local conditions, improving the |
| in terms of assets. The sample consisted of 6 | | | | relevance i.e. indigenisation of accounting standards |
| private and 4 public companies. The simple per | | | | to make the standards more suitable or |
| centage method is used to analyze the data. The | | | | appropriate to the existing industrial phenomenon |
| authenticity of the data is verified with the | | | | in Oman.ii) The Capital Market Authority in Oman |
| opinions of management, who are aware of the | | | | in consultation with other professionals and |
| company affairs and Corporate Governance. The | | | | regulatory bodies should evolve some mechanism |
| corporates' perceptions on the relevance of | | | | to limit the scope of alternative methods available |
| accounting standards for good Corporate | | | | within an accounting standard. Thus,the use of |
| Governance in the context of Oman are also | | | | uniform accounting standards would enhance the |
| examined.STANDARDS IN OMAN:In any country, | | | | qualitative and comparability dimensions of financial |
| the awareness and competitiveness among the | | | | statement and reporting.iii) The establishment of |
| corporates would be strengthened when they | | | | harmony among the applicable laws like |
| understand each other and compare their | | | | Companies Act, Income Tax Act, Banking |
| performance, for which the simple, understandable | | | | Regulations etc., which have significant bearing on |
| and comparable disclosure is an important | | | | different items of financial statements, would give |
| instrument. The main objective of disclosure | | | | true and fair view of business.iv) The formulation |
| would be fulfilled and the utility of the disclosure | | | | of comprehensive and indigeneous standards, like |
| towards good Corporate Governance would be | | | | accounting for changes in prices, inflationary |
| improved when the disclosure is done on the basis | | | | economies, segment accounting, accounting for |
| of uniform and consistent accounting standards. | | | | joint ventures, earning per share, investment in |
| Thus, the development and the practice of | | | | subsidiaries, associates etc., useful to make |
| uniform accounting standards has become an | | | | accounting standards more user friendly and |
| essential ingredient of Corporate Governance and | | | | international acceptable.To sum up, though the |
| the various bodies have been contributing their | | | | entire industrial community in Oman has been |
| wisdom to strengthen the standards to make the | | | | following the International Accounting Standards |
| Corporate Governance more effective in the | | | | and adopting disclosure practices to ensure true |
| context of the changing corporate environment. | | | | and fair view of the economic activities, still a lot |
| The corporate management is also now feeling | | | | more needs to be done to promote good |
| the pressure for reforming accounting practices | | | | corporate governance and a healthy investment |
| and level of transparency emanating from alert | | | | climate. The other middle east countries, which |
| lenders, regulatory agencies, financial analysts and | | | | adopt the policy of liberalization and intend to |
| above all, board of directors who realize that it is | | | | increase in international capital market activities |
| the quality of information which will determine | | | | due to globalization should learn that reducing the |
| how efficiently they have discharged their | | | | variety of approaches in the each accounting |
| responsibilities towards the good Corporate | | | | standards, formulating the comprehensive and |
| Governance.In Oman, though the financial | | | | indigeneous standards and making all accounting |
| statements have been prepared in accordance | | | | standards as mandatory have to be given top |
| with International Accounting standards issued by | | | | priority for attaining the required objectives, |
| the International Accounting Standards Committee | | | | otherwise it will be exceedingly difficult for Oman |
| (IASC), interpretations issued by the Standing | | | | investors to trust the Corporate |
| Interpretation Committee of the IASC and the | | | | **************************** |
| requirements of the Commercial Companies Law | | | | * The article is presented in Accounting, |
| of the Sultanate of Oman and the disclosure | | | | Commerce & Finance: The Islamic Perspective |
| requirements set out in the rules for disclosure | | | | International Conference V, held in Brisbane, |
| issued by the Capital Market Authority of the | | | | Australia during 15-17, June 2004.REFERENCES:1. |
| Sultanate of Oman, the disclosure is inadequate | | | | Tiwary, Ojha, Arun Kumar, "Corporate |
| and is a negative phenomenon to a country which | | | | Governance in India: What it Means and What it |
| wishes to be strengthened further, because it | | | | needs?", The Indian Journal of Commerce, New |
| cannot hope to tap the GDR market with | | | | Delhi, Oct-Dec,1998, p.154.2. Chandratre, KR, "Role |
| inadequate financial disclosures, since the more | | | | of Board of Directors in Emerging Dimensions of |
| transparent activities of a company governed by | | | | Corporate Governance and Impending Changes in |
| the proper accounting standards, the more | | | | Company Law, The Chartered Secretary, The |
| accurately will its securities be valued(5).The | | | | Institute of Chartered Secretary of India, New |
| International Accounting Standards followed in | | | | Delhi, May 97, p. 505.3. R.I.Ticker, "Corporate |
| Oman industry are Presentation of Financial | | | | Responsibility, Institutional Governance and the |
| Statements (IAS 1); Inventories (IAS 2); Cash | | | | Roles of Accounting Standards" in Michael |
| Flow Statements (IAS 7); Net Profit or Loss for | | | | Bromwich and Anthony G. Hopwood (Eds.), |
| the period (IAS 8); Fundamental Errors & | | | | Accounting Standards Setting, An International |
| Changes in Accounting policies (IAS 9); Events | | | | Perspective, Pitman Books Ltd., London, 1883, |
| After the Balancesheet Date (IAS 10); | | | | p.27., Cited in Lele RK, Jawahar Lal, "Accounting |
| Construction Contracts (IAS 11); Income Taxes | | | | Theory", Himalaya Publishing House, New Delhi, |
| (IAS 12); Segment Reporting (IAS 14); Effects of | | | | 96,p.56.4. Sir Adrian Cadbury, "Developments in |
| Changing Prices (IAS 15); Property, Plant and | | | | Corporate Governance", The Company |
| Equipment (IAS 16); Leases (IAS 17); Revenue | | | | Secretary, The Institute of Chartered Secretary |
| (IAS 18); Employment Benefits (IAS 19); | | | | of India, New Delhi, May 97, p. 497.5. The Report |
| Accounting for Govt. Grants & Govt. Assistance | | | | of the Cadbury Committee on "Financial Aspects |
| (IAS 20); Effects of Changes in Foreign Exchange | | | | of Corporate Governance", The Company |
| Rates (IAS 21); Business Combinations (IAS 22); | | | | Secretary, The Institute of Chartered Secretary |
| Borrowing Costs (IAS 23); Related Party | | | | of India, New Delhi, May 97, p. 573.6. Verma, |
| Disclosures (IAS 24); Retirement Benefit Plans | | | | Garg, Singh, "Disclosure of Accounting Standards |
| (IAS 26); Consolidated Financial Statements (IAS | | | | Vis-Ã -vis Company Characteristics: A Study of |
| 27); Investments in Associates (IAS 28), | | | | Indian Corporate Sector", The Indian Journal of |
| Hyperinflationary Economies (IAS 29); Banks & | | | | Commerce, New Delhi, Oct-Dec,1998, |
| Similar Financial Institutions (IAS 30); Interests in | | | | ***********************BIOGRAPHICAL |
| Joint Ventures (IAS 31); Financial Instruments: | | | | DETAILS OF AUTHORS:Dr.K.Shankaraiah, |
| Disclosure & Presentation (IAS 32); Earnings Per | | | | Assistant Professor in Accounting |
| Share (IAS 33); Interim Financial Reporting (IAS | | | | & D.N.Rao, Lecturer in Finance |
| 34); Discontinuing Operations (IAS 35); Impairment | | | | College of Commerce & Economics, Sultan |
| of Assets (IAS 36); Provisions, Contingent | | | | Qaboos University, PB 20, PC 123, Al Khod, |
| Liabilities & Assets (IAS 37); Intangible Assets | | | | Muscat, Sultanate of Oman.1. Dr.K.Shankaraiah: |
| (IAS 38); Financial Instruments: Recognition & | | | | A Senior Associate Professor of Commerce in |
| Measurement (IAS 39); Investment Property | | | | Osmania University, Hyderabad, Andhra Pradesh, |
| (IAS 40); Agriculture (IAS 41).Though the Oman | | | | India with 18 years of teaching and research |
| industry has been following all the International | | | | experience. |
| Accounting Standards, in practice, some of them | | | | Working as Assistant Professor in Accounting in |
| are not free from criticism due to certain inherent | | | | College of Commerce & Economics, Sultan |
| weaknesses. The practices of these standards in | | | | Qaboos University, Sultanate of Oman. |
| the Oman industries and the gaps are discussed in | | | | Worked as Accounting Section Head in the |
| what follows with a view to strengthen them for | | | | Department of Business Management of Bahrain |
| ensuring the good Corporate | | | | Training Institute, Ministry of Labour & Social |
| Governance.PRACTICES:The primary and | | | | Affairs, Kingdom of Bahrain. |
| secondary data collected from the select | | | | Participated in various national and intenational |
| companies are carefully examined to find the | | | | seminars. |
| extent of compliance with the accounting | | | | Published about 30 articles in various journals of |
| standards and issues in corporate practices. Some | | | | national and international repute. |
| of the important findings are as follows:i) | | | | Written books and developed course materials |
| Perceptions on the relevance of Accounting | | | | for academecians, researchers and tudents. |
| Standards for Corporate Governance: Except one | | | | Areas of specialisation are accounting and finance. |
| sample of private companies which has not | | | | |
| disclosed its opinion, all others (90% of the | | | | Undertaken various research projects and |
| sample) have expressed the accounting standards | | | | providing guidance to Ph.D. research scholars. |
| as more relevant for Corporate Governance.ii) | | | | Member and Resource person of various |
| Practices of Accounting Policies Disclosed in Annual | | | | academic and professional bodies.2. D.N. |
| Reports: The majority of the sample companies | | | | |