Ensuring Effectiveness of Government Accounting
Accrual Accounting Program
The federal government’s transition to accrual accounting improves effectiveness of financial planning and ensures the implementation of the UAE federal accounting according to the international best practices. This programme is part of the MoF’s directives to manage and develop the financial resources of the federal government efficiently and innovatively. It will make MoF one of the leading ministries regionally and globally in the management of public financial affairs, in compliance with requirements of the International Monetary Fund (IMF) and international competitiveness standards.
The Ministry of Finance (MoF) has launched a comprehensive and integrated programme that would shift the federal government’s accounting framework based on a modified cash basis to an accrual accounting framework. This new approach represents a milestone in the history of the UAE federal government, as it enables MoF to achieve its strategic objectives, particularly the optimisation of financial planning and the implementation of the federal budget in accordance with the international best practices.
The accrual accounting programme is based on Federal Decree Law No (26) of 2019, which states that this programme shall be applied in a phased manner. The federal entities were divided into groups to facilitate the implementation of the accrual accounting, and the opening balances of the federal entities were prepared and successfully uploaded to the system. As of January 1st, 2021, federal entities started applying accrual accounting to carry out all transactions and monthly closings.
The Ministry of Finance has implemented the accrual accounting programme based on Cabinet Resolution No (35/3/6) of 2013, Resolution No (2/2) of 2017 regarding the adoption of the Manual of Federal Government Accrual Accounting Standards, and Cabinet Resolution No (21/3F) of 2021 on the transition of the federal government from the cash basis to the accrual basis of accounting.
The Ministry of Finance set the federal standards on the accrual basis of accounting, which were approved by the UAE Cabinet by virtue of Resolution No (2/2) of 2017. The federal standards on the accrual basis of accounting were then updated under Cabinet Resolution No (21/3F) of 2021.
Benefits of Accrual Basis of Accounting
The UAE is the First Arab Country to Apply Accrual Accounting
Based on Cabinet Resolution No (21/3 F) of 2021 regarding the implementation of accrual accounting in the federal government, and the adoption of the Manual of Federal Government Accrual Accounting Standards to be implemented in federal entities for the year 2021, all federal entities have implemented the accrual basis of accounting; thus, making the UAE the first Arab country to adopt the accrual accounting. The accrual basis of accounting is a tangible indicator of the UAE government’s position as one of the world’s leading governments in applying the best management methodologies and public accounting standards.