How are IFRS applied in Panama?
In Panama, the adaptation of IFRS as a framework of accounting principles by companies for the preparation of their financial statements is becoming more and more latent because it contributes to the strengthening of operations.
As transactions became larger and more complex in the stock market and the banking center, Panama began to see the need and importance of maintaining a body of strict reference standards for accounting and preparation of financial statements.
The application of the International Financial Reporting Standards (IFRS) is a tool that helps to improve the operation and growth of companies, considering the fact that Panama did not have a solid accounting framework, having to resort to the IFRS, for the application of issues not addressed in the generally accepted accounting principles.
The Technical Accounting Board is in charge of the control of Accountants and Certified Public Accountants (CPA); complying with the provisions of Law No. 57, which regulates the practice of the profession. Its function is to “Supervise the professional practice with the purpose of ensuring that it is carried out within the highest technical and ethical level, with the collaboration of the professional associations.”
The Financial Accounting Standards Commission of Panama (NOCOFIN) was created by the Technical Accounting Board of Panama in 1986. It is made up of CPAs appointed by the professional accounting associations registered with the Technical Accounting Board and of CPA professors from state-recognized universities that teach accounting.
The main responsibility of the commission is to adopt financial accounting standards in Panama.
Regulatory framework for the issuance of financial statements
The accounting regulation in Panama is based on the Financial Reporting Standards (IFRS) and the International Financial Reporting Standards for SMEs (IFRS for SMEs). The Financial Reporting Standards structure the accounting theory establishing the limits and operating conditions of the accounting information system. They serve as a regulatory framework for the issuance of financial statements.
The IFRS issued and to be issued by the International Accounting Standards Board (IASB), an independent body established to promulgate accounting standards of worldwide application, were adopted as its own and applied in the Republic of Panama, according to Law No. 6 of February 2, 2005, Article 74, paragraph 1. In addition, the General Revenue Directorate orders the preparation of taxpayers’ income tax returns based on accounting records using the accrual system on the basis of the International Financial Reporting Standards.
IFRS are mandatory for the preparation and presentation of financial statements and their application is required for regulated companies:
- By the Superintendence of Banks.
- By the National Securities Commission of Panama.
- By the Insurance and Reinsurance Superintendence.
The Panamanian Technical Accounting Board adopted the IFRS for SMEs as a requirement in the preparation of general purpose financial statements, as well as in other financial information, for all those entities that are not listed in the stock market or that do not have public accountability, as defined in the International Financial Reporting Standard for Small and Medium Sized Entities.