Regulatory requirements translated into accounting positions and controls

SOCPA endorsed IFRS for all entities in Saudi Arabia, with a small number of amendments and additional requirements. The most significant relate to Zakat and income tax (accounted for under IAS 12 principles with SOCPA guidance following the 2019 change that moved Zakat from equity to profit or loss), certain additional disclosure requirements, and SOCPA standards and pronouncements that apply to matters not covered by IFRS. Entities must also apply the interpretations SOCPA issues on the application of IFRS in the Saudi environment. We maintain a checklist of these differences and apply it in policy and disclosure reviews.

SAMA expects a board-approved impairment policy, documented and validated models, a clear definition of default aligned with the regulatory 90-day threshold, forward-looking scenarios with documented weights, an overlay policy that requires justification and time limits, back-testing, and internal audit coverage. Finance companies licensed by SAMA face similar expectations scaled to their size. We prepare the governance documentation and evidence pack that examiners request.

Following SOCPA's 2019 guidance, Zakat is recognised in profit or loss rather than directly in equity, with a current liability for the amount payable and disclosure of the Zakat base and the reconciliation to the charge. Mixed companies with both Saudi and foreign shareholders apportion between Zakat and income tax. We compute the Zakat provision in coordination with your tax advisor, ensure the accounting treatment is correct, and prepare the disclosure.

Moving from cash or modified-cash accounting to accrual-based IPSAS requires recognising assets and liabilities that were never recorded: property, infrastructure, heritage assets, employee benefit obligations, provisions and receivables. IPSAS 33 governs first-time adoption and allows transitional relief of up to three years for certain items. Our approach covers governance and project set-up, policy selection, asset identification and valuation, opening balance sheet, system changes, first financial statements and capacity building for the finance team.

Regulators require historical financial information prepared to a consistent accounting basis, usually three years, together with evidence that the entity has reporting procedures capable of producing timely, reliable information after listing. We restate historical financials where needed, document accounting policies, design the reporting procedures and controls, and support the reporting accountants' due diligence.

We do not give legal advice. On tax, our work is the accounting and compliance side: zakat base computation, provision accounting and return preparation are covered by our Zakat Calculation & Filing service; for contested positions, income tax and VAT representation and litigation we coordinate with licensed tax advisors and lawyers.