In 2002, the World Bank conducted an assessment of accounting and auditing practices in Egypt in order to evaluate the weaknesses and strengths of the Egyptian accounting and auditing requirements, and to review the reporting requirements against actual practices. International Financial Reporting Standards (IFRSs) and International Standards on Auditing (ISAs) were used as the benchmarks for assessing national standards. It was concluded that significant progress has been made in eliminating differences between Egyptian Accounting Standards (EASs) and IFRSs (at the time of the assessment designated as International Accounting Standards - IASs, later renamed as IFRSs). As of 2002, the EASs in general were developed in accordance with IFRSs except for accounting for leases. Since then the International Accounting Standards Board (IASB) has substantially changed the body of IFRSs and there is no indication that the changes have been incorporated into Egyptian accounting requirements. In its 2002 assessment the World bank also commented on the insufficient knowledge about IFRSs, lack of implementation guidelines, and weak enforcement that lead to the overall low quality of financial reporting. It was recommended to work out an accounting reform plan taking into consideration inputs provided by the World Bank's assessment.

General Overview

In 2002, the World Bank conducted an assessment of accounting and auditing practices in Egypt which formed a part of the Word Bank and the International Monetary Fund's initiative on Reports on the Observance of Standards and Codes (ROSC). The 2002 ROSC evaluated the weaknesses and strengths of the Egyptian accounting and auditing requirements, and reviewed the reporting requirements against actual practices. International Financial Reporting Standards (IFRSs) and International Standards on Auditing (ISAs) were used as the benchmarks for assessing national standards. It was concluded that significant progress has been made in eliminating differences between Egyptian Accounting Standards (EASs) and IFRSs (at the time of the assessment designated as International Accounting standards - IASs, later renamed as IFRSs). As of 2002, the EASs in general were developed in accordance with IFRSs except for accounting for leases. Since then the International Accounting Standards Board (IASB) has substantially changed the body of IFRSs and there is no indication that the changes have been incorporated into Egyptian accounting requirements.

Accounting Practice Law No. 133/1951 sets the broad framework for financial reporting in Egypt, and it is supplemented by a number of other pieces of legislation. The major changes proposed to the Accounting Practice Law, as indicated in the 2004 World Bank's assessment of corporate governance in Egypt, include (1) all corporate auditors must pass two exams to ensure that they understand accounting and auditing standards and know how to apply them; (2) firms will be allowed to audit financial statements (the previous law only allowed individuals to perform this function; (3) establishment of a Supreme Council for Accounting and Auditing; (4) establishment of an Accounting Oversight Board; and (5) auditors will generally not be allowed to provide consulting services to the companies they audit.

Company Law No. 159 of 1981 requires all companies registered under the law to prepare annual audited financial statements. Audits are required to be prepared in accordance with the Accounting Practice Law, and the accounting and auditing standards are not specified. Capital Market Law 95/1992 requires listed companies to follow EASs and in the absence of a corresponding EASs, companies should refer to IFRSs. The Listing Rules mandate auditing and disclosure requirements for listed companies. The Banking Law sets legal foundations for banks and mandates the use of accounting and auditing standards prescribed by the Central Bank of Egypt (CBE) which requires the use of EASs.

The 2004 World Bank ROSC noted that the Capital Markets Authority (CMA) and the CBE monitor compliance with reporting requirements. While the CMA has the powers to request information and impose sanctions in case of non-compliance, the CBE relies on bank auditors' opinion for verification of the accuracy of the information provided by the regulated entities. The Cairo Stock Exchange (CASE) enforces its listing rules; however, it has no powers to ensure compliance with the reporting requirements (2002). Overall, the insufficient knowledge about IFRSs, lack of implementation guidelines, and weak enforcement lead, according to the World Bank, to the overall low quality of financial reporting. It was recommended to work out an accounting reform plan taking into consideration inputs provided by the World Bank's assessment.

Egyptian accounting and auditing standards are adopted by the Permanent Committee for Standards of Accounting and Auditing which was established by the Ministerial Decree 478/1997 issued in 1997 by the Ministry of Economy and Foreign Trade (now Ministry of Trade and Industry, or MTI). According to the World Bank's 2002 ROSC, the Committee adopts the standards drafted by the Egyptian Society of Accountants and Auditors (ESAA). According to the self-assessment prepared by the ESAA as a part of the International Federation of Accountants' (IFAC) Member Body Compliance Program in 2006, the draft standards are exposed for comments from industry experts and practitioners. The standards are modified (if necessary) and are submitted to the Committee for final adoption. The World Bank noted that the MTI issues the final standard by a ministerial decree. The Egyptian Society of Accountants and Auditors (ESAA) is a member of the International Federation of Accountants. (IFAC website)

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IFRS 2: Share-based Payment (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IFRS 3: Business Combinations (effective 2004)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IFRS 4: Insurance Contracts (effective 2006)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IFRS 7: Financial Instruments: Disclosures (effective 2007)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 1: Presentation of Financial Statements (effective 2007)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 2: Inventories (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 7: Cash Flow Statements (effective 1994)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 10: Events after the Reporting Period (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 11: Construction Contracts (effective 1995)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 12: Income Taxes (effective 2001)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 14: Segment Reporting (effective 1998)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 16: Property, Plant and Equipment (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 17: Leases (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 18: Revenue (effective 1995)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 19: Employee Benefits (effective 2006)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 23: Borrowing Costs (effective 1995)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 24: Related Party Disclosures (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 28: Investments in Associates (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 31: Interests in Joint Ventures (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 33: Earnings per Share (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 34: Interim Financial Reporting (effective 1999)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 36: Impairment of Assets (effective 2004)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 38: Intangible Assets (effective 2004)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 40: Investment Property (effective 2005)

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There is insufficient publicly available information as to Egypt's compliance with this principle.

IAS 41: Agriculture (effective 2003)

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There is insufficient publicly available information as to Egypt's compliance with this principle.