At the end of 2019, the national outlook for Iraq was optimistic. The country was emerging after four years of challenging economic conditions, GDP growth was positive, the non-oil sector was growing, and Iraq had been signatory to several key trade agreements with its neighbors. Overall, reconstruction efforts were proceeding at a reasonable pace and expectations were that this would continue. However, in early 2020, much of this positive progress ground to a halt. As countries around the world came to terms with the impact of the global pandemic, Iraq was faced with a dual health and economic crisis.
As the country navigates the economic challenges presented by the pandemic, the Iraqi Union of Accountants and Auditors (IUAA) has actively supported its members to provide business advisory, strategic planning, and accountancy services. IUAA members have assisted their clients in sectors including manufacturing, agricultural, healthcare, and others to respond to the crisis and contribute to the resilience of the Iraqi economy. Proximity to their clients, and the provision of direct, tailored support has given the IUAA a unique perspective when it comes to looking ahead and supporting businesses both during and post-COVID-19.
While the pandemic has highlighted many issues of concern for the Iraqi private sector, in the opinion of the IUAA, chief amongst them is the fundamental weakness of the country’s current basis of financial reporting. Unreliable financial information harms the very foundations of an organization, undermining its strategic planning, health, and sustainability. As the country repositions itself on the path of economic growth and development, the IUAA is calling for clarification of the legal and regulatory framework and adoption of IFRS Standards as issued by the International Accounting Standards Board (Board).
IFRS Standards provide a high quality, internationally recognized set of accounting standards that enable the private sector to be transparent, accountable, and efficient. By enhancing the quality and the international comparability of financial information, IFRS Standards enable investors and other market participants to make informed economic decisions. Furthermore, IFRS Standards reduce the information gap between the providers of capital and the people to whom they have entrusted their money. Finally, IFRS Standards contribute to economic efficiency by helping investors to identify opportunities and risks across the world, thus improving capital allocation. For businesses, the use of a single, trusted accounting language lowers the cost of capital and reduces international reporting costs. The IUAA strongly believes that the use of IFRS Standards would not only help Iraqi companies align to global best practices and attract Foreign Direct Investment (FDI) but would also facilitate businesses’ presentation and assessment of their financial condition today as well as strategic planning of their businesses going forward.
In support of their commitment to the economy, the IUAA has developed training programs and outreach on the subject of IFRS, engaged with regulators and legislators to raise awareness of the standards, and has been in active dialogue with the International Federation of Accountants (IFAC) to access resources and technical assistance. Furthermore, the IUAA will be entering into a collaborative agreement with the Institute of Chartered Accountants of England and Wales (ICAEW) to support the IUAA on its journey and developing a CPA roadmap for the country. Although this support will greatly advance accountancy in Iraq, the IUAA notes that the country’s current piecemeal regulations regarding the use of IFRS Standards and ambiguity regarding their adoption need to be addressed.
IUAA recognizes that time, energy, and resources are needed to support client partners as they continue to face the challenges of COVID-19 and its economic and financial impacts. However, in addition to working through the challenges of today, the Iraqi financial sector must also address the underlying vulnerabilities of its financial reporting framework and ensure that the country and its enterprises are sufficiently prepared to meet the challenges of tomorrow.
The adoption and implementation of IFRS Standards will facilitate this future-focus, helping the country regain its momentum and securing a brighter future for the Iraqi people.