A New Egyptian Accounting Standards

The Board of Directors of the Egyptian Financial Supervisory Authority (“EFSA”) issued a decision on the Egyptian Accounting Standards Guide for Insurance Companies[1] (the “Guide”). The decision aims to provide insurance companies with a detailed guide on how to apply the Egyptian Accounting Standards considering the special nature of insurance companies.

Background

The Minister of Investment had issued decision No. 356 for the Year 2007[2] that provides that the Egyptian Accounting Standards are to be applied on insurance and reinsurance companies subject to law No. 10 for the Year 1981 on the supervision and oversight of insurance activities[3] (the “Insurance Law”). The decision delegated to the Egyptian Insurance Supervisory Authority (which has been replaced by EFSA by virtue of law No. 10 for the Year 2009)[4] the responsibility of issuing an explanatory guide for insurance companies which would clarify the application of these standards. In 2015, the Minister of Investment issued decision No. 110 for the Year 2015 which provides the new accounting standards replacing the standards then in place. Subsequently, a working group has been assembled to update the Guide and EFSA’s Board of Directors approved the work product of the working group at its session number 6 on the June 21, 2016.

The Provisions of the Decision

The decision provides that insurance and reinsurance companies subject to the Insurance Law have to comply with the Guide when applying the Egyptian Accounting Standards issued by the aforementioned Minister of Investment decision No. 110 for the Year 2015. The Guide gives practical instructions on applying the Egyptian Accounting Standards in light of the accounting and investment requirements found in the Insurance Law and EFSA’s decrees issued on the subject matter. This Guide strives to ensure more transparency and disclosure. It also strives to ensure a better understanding of those who use the data and financial reports whether they were shareholders or investors in the market or otherwise. The Guide displays the applicable rules in four sections: (1) The Presentation of Financial Statements (2) The Rules for Preparing and Copying Financial Statements. Sections (3) and (4) include forms for the financial statements and explanatory notes of financial statements, which insurance companies have to follow.

Conclusion

This Decision constitutes a practical guide for companies working in the insurance and reinsurance sector in Egypt on the application of the Egyptian Accounting Standards considering their special nature. This provides the recipients of these companies’ financial statements with complete information and allows for total disclosure of the company’s financial status, its investments, its liquidity ratio, and the size of its assets. [1] Egyptian Financial Supervisory Authority Board of Directors’ Decision No. 70/2016 regarding the Egyptian Accounting Standards Guide for Insurance Companies, Egyptian Gazette, Issue No. 157 (cont.), July 12, 2016. [2] Minister of Investment’s Decision No. 345/2007, Egyptian Gazette, Issue No. 3, January 3, 2008. [3] Law No. 10/1981 on the supervision and oversight of insurance activities in Egypt, Official Gazette, Issue No. 10 (cont.) (b), March 5, 1981. [4] Law No. 10/2009 regulating the non-banking financial markets and instruments, Official Gazette, Issue No. 9 (bis), March 1, 2009.