The Ministry of Finance (MoF) announced on Sunday the launch of the first phase of government entities to transition to accrual accounting. Image Credit: Virendra Saklani/Gulf News

Dubai: The Ministry of Finance (MoF) announced on Sunday the launch of the first phase of government entities to transition to accrual accounting.

The process took place during the work-from-home period, The ministry used telecommunication platforms to host virtual meetings and trainings for users of the federal government financial system, and included online surveys to collect feedback on the training and testing sessions to ensure the system’s efficacy.

The transition to accrual accounting represents a critical step that increases the efficiency of the federal budget and improves public financial management in the country. The first phase of the project included the Ministry of Economy, the Ministry of Community Development, the Ministry of State for Federal National Council Affairs, the Federal Tax Authority, the Federal Customs Authority and the UAE Space Agency.

Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and Minister of Finance, reaffirmed the UAE government’s keenness to plan for the future through innovative projects that support the wise leadership’s vision to make the UAE the best country in the world by the UAE Centennial 2071. The launch of the accrual accounting programme is another step towards achieving the goals of the UAE Vision 2021.

Obaid Humaid Al Tayer, Minister of State for Financial Affairs, said that the launch of federal government transition programme was a success, despite the exceptional circumstances that country and world are witnessing.There were continuous efforts from the teams in MoF in cooperation with all federal entities, as MoF led and directed 36 federal entities during the transition phase.

“An accrual basis of accounting will have a positive effect on the country’s economy and society, in terms of achieving the development and sustainability of the financial system, as well as managing the financial resources of the federal government efficiently and effectively. It will also enable competent authorities to enhance the transparency of financial reports in line with the requirements of the International Monetary Fund (IMF) and global competition standards,” said Al Tayer

This marks the UAE government’s transition programme from cash basis accounting to accrual accounting that is vital step in public financial management.

“The Ministry of Economy was included in phase one of the transition programme and launched the new financial system after completing the inventory of assets and balances, training personnel, and approving the required financial reports and analyses. The ministry began to adopt accrual accounting in the beginning of June 2020,” said Sultan Bin Saeed Al Mansoori, Minister of Economy .

What is Accrual Accounting?
Accrual accounting is an accounting method that recognises financial expenses when they occur, regardless of when payment is made. In accrual accounting method, economic events are recognised in the accounts by matching revenues to expenses (the matching principle) at the time in which the transaction occurs as opposed to when the payment is made or received.
In the first phase, the UAE has luanced an integrated financial system that allows the transition to accrual accounting, through which all transactions, balances and closings are recorded on June 1, 2020, and the opening balances of all federal entities are prepared according to the approved transformation plan. Furthermore, all transactions, balances and accounts are converted into the accrual principle (revenue, expenses, liabilities, employee benefits, monthly closings). This is in addition to preparing the comprehensive assets record for the federal government, continuous training on accounting activities and standards for all federal agencies, setting guidelines for accounting policies and worksheets to apply accounting on an accrual basis.